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UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


LEADING  AND  SELECT  CASES 

ON 

TRUSTS: 

WITH 

EXTENDED  ABSTRACTS  OF  IMPORTANT  CASES; 

EXPLANATORY  AND  CRITICAL  NOTES; 


NUMEROUS  CITATIONS  OF  AUTHORITIES  BEARING 

ON  EVERY  BRANCH  OF  THE 

LAW  OF  TRUSTS. 

ALSO, 

A  FULL  REPORT  OF  THE  GREAT  CASE 

OF  THE 

COVINGTON  AND  LEXINGTON  RAILROAD  COMPANY, 

Against 

ROBERT  B.  BOWLER'S  HEIRS,  AND  OTHERS, 

JUST  DECIDED 

AT  THE  WINTER  TERM,  1873,  OF  THE  COURT  OF  APPEALS 
OF  THE  STATE  OF  KENTUCKY. 


BY  PETER    Z 

Of  the  Cincinnati  Bar, 


CINCINNATI: 
ROBERT    CLARKE    &    COMPANY. 

1873- 


Entered,  according  to  Act  of  Congress,  in  the  year  1873, 

BY  PETER  ZINN, 
In  the  Office  of  the  Librarian  of  Congress,  at  Washington. 


PREFACE. 


THIS  work  has  its  origin  mainly  in  two  circumstances  : 
First,  in  there  being  heretofore  no  special  compilation  of  au- 
thorities on  the  subject  of  TRUSTS;  and,  secondly,  a  desire  to 
economize  labor  in  the  preparation  of  the  Covington  and  Lex- 
ington Railroad  case  for  trial.  In  default  of  being  beneficial 
in  that  case,  it  was  desired  to  put  the  result  of  this  work  in 
such  form  as  to  renew,  in  the  attention  of  the  profession  and 
the  reading  public,  the  great  rules  for  the  administration  of 
trusts.  In  their  actual  application,  they  have  recently  been  so 
disregarded  as  to  lead,  in  many  cases,  to  the  erroneous  opinion 
that  practice  had  established  these  rules  adversely  to  the  prin- 
ciples. As  is  well  known  to  many,  the  labor  indicated  has 
been  made  almost  the  exclusive  business  of  the  author  of  this 
compilation,  from  the  inception  of  the  suit,  in  1864—5,  to  the 
present  time. 

In  the  selection  of  Leading  Cases,  I  have  taken  such  as 
have  been  the  result  of  the  most  deliberate  consideration  and 
labor  of  the  judicial  minds  whose  opinions  have  given  shape 
and  weight  to  the  laws  of  England  and  America.  In  the  choice 
of  other  cases,  I  have  selected  those  especially  lately  decided, 
which,  it  is  hoped,  will  prove  of  practical  use  to  the  profession, 
and  still  further  illustrate  the  principles  of  those  that  have 
become  leading,  and  are  the  productions  of  the  "great  masters," 
as  it  were.  Several  will  be  found  of  the  most  interesting 
character ;  and  the  intelligent  non-professional  reader  will  find 
in  this  volume,  matter  that  will  richly  repay  for  the  time  con- 
sumed, as  well  in  the  interest  of  the  narrative  as  in  the  infor- 
mation communicated.  Several  deserve  special  mention.  Such 
are,  the  series  of  Girard  Will  cases;  the  Fisk  and  Erie  Railroad 


IV  PREFACE. 

case ;  the  Cumberland  Coal  Company  cases ;  those  on  Charita- 
ble Bequests;  the  Washington  and  Georgetown  Railroad  case; 
those  on  the  Marital  Relations,  etc.  In  these  pages,  in  direct 
contradiction  of  the  general  opinion,  that  the  law  is  specially 
dull  and  prosy,  will  often  be  found  verified  the  more  trite  say- 
ing, that  "  truth  is  stranger  than  fiction."  Several  of  them 
will  be  found  particularly  useful  as  practice  cases,  and  in  point- 
ing out  the  ways  by  which  equity  works  out  the  relief  admin- 
istered, especially  the  Kentucky  case  of  Faris  v.  Dunn,  297. 

In  the  report  of  the  great  railroad  case  already  referred  to, 
the  intention  has  been  to  deal  with  it  with  strict  impartiality ; 
and  especially  to  present  the  points  of  law  and  testimony  upon 
which  the  parties  respectively  relied.  Of  course,  all  this  can 
not  be  done  satisfactorily  within  the  hundred  pages  devoted  to  it. 

In  the  arrangement  of  the  notes,  the  intention  has  been  to 
illustrate  the  text,  and  aid  in  the  examination  of  the  different 
points  decided.  The  endeavor  has  been  to  make  a  useful 
rather  than  an  ornamental  work. 


TABLE  OF  CASES. 


PAGE. 

ABERDEEN  EAILWAY  Co.  v.  Blaikie  Bros.,  1  M'Queen,  461 76 

Alemany;  Wensinger,  et  als.,  v.,  40  California,  288 345 

Alex.  K.  E.  Co.;  Wash.,  etc.,  E.  E.  Co.  v.,  19  Grattan,  592 268 

Baker  v.  Whiting,  3  Sumner's  Ct.  C.  475 136 

Bankart  v.  Tennant,  10  Eq.  Cases  (L.  E.  S.),  145 n.133 

Barclay  v.  Lewis,  67  Penn.  St.  (17  P.  F.  Smith),  316 362 

Blaikie  Bros.;  Aberdeen  E.  E.  Co.  v.,  1  M'Queen,  461 76 

Blankman  ;  Boyd  t>.,  29  California,  19 147 

Board  of  Ed.  Yan  Wert  v.  Van  Wert,  18  Ohio  St.  221 339 

Board  of  Supervisors  Kane  Co.  v.  Harrington,  50  111.  232 158 

Bowler's  Heirs,  et  ah.;  Cov.  &  Lex.  E.  E.  Co.  v 466 

Boyd  v.  Blankman,  29  California,  19 147 

Chaplin's  Exrs.;  Miller  v.,  20  Ohio  St.  442 253 

Cin.  &  Whitewater  Canal  Co.;  Goodin  v.,  18  Ohio  St.  169 125 

Cockerell,  et  a/a.;  Wall  v.,  10  House  of  Lords  Cases,  229 388 

Cov.  &  Lex.  E.  E.  Co.  v.  Bowler's  Heirs,  et  ah 466- 

Crawford;  Gilljland  v.,  4  Irish  (Eq.  Series),  35 392 

Cross;  Drury  v.,  7  Wallace,  299 262 

Cumberland  Coal  &  Iron  Co. ;  Hoffman  Coal  Co.  v.,  16  Md.  456     87 

Same  Parties          30  Barbour,  553 n.87,  w.98 

Dale  v.  Hamilton,  22  Eng.  Ch.  266 n.189 

Davoue  v.  Fanning,  2  Johns.  Ch.  252 1 

Dimes  v.  Grand  June.  Canal  Co.,  3  House  of  Lords  Cases,  759..  456 

Drury  v.  Cross,  7  Wallace,  299 262 

Duncan,  Sherman  &  Co.;  Jaudon  v.,  8  Blatch.  430 379 

Dunn;  Faris  and  wife  v.,  7  Bush's  Ky.,  276 297 

Duvall  v.  Graves,  7  Bush,  461 n.296 

"Edson,  et  al;  Board  of  Ed.  of  Van  Wert  v.,  18  Ohio  St.  221....  339 
Erie  E.  E.  Co.,  Fisk,  et  ah.;  Heath  v.,  8  Blatch.  347 430 

Fanning;  Davoue  v.,  2  John's  Ch.  252 1 

Faris  and  wife  v.  Dunn,  7  Bush,  276 297 

Faucett  v.  Faucett,  1  Bush,  511 177 

Fisk,  Gould,  et  ah.;  Heath  v.,  8  Blatchford,  347 430 

Follansbe  v.  Kilbreth,  et  al,  17  Illinois,  522 180 


VI  TABLE  OF  CASES. 


PAGE. 

Gardner  v.  Ogdon,  22  New  York,  327 115 

Gilliland  v.  Crawford,  4  Irish  (Eq.  Series),  35 3 

Girard,  Phila.,  etah.;  Vidal  t>.,  2  Howard,  127 214 

Girard  v.  Philadelphia,  7  Wallace,  1 238 

Girard  Will  Case,  No.  1,  2  Howard,  127 214 

Same        No.  2,  7  Wallace,  1 238 

Girod,  etalt.;  Michoud,  et  alt.,  v.,  4  Howard,  503 42 

Goodin  v.  Cin.  &  Whitewater  Canal  Co.,  18  Ohio  St.  169 125 

Gould,  Fisk,  et  alt.;  Heath  v.,  8  Blatch.  347 430 

Grant;  Rostetter  and  wife  r.,  18  Ohio  Stat.  126 293 

Grand  June.  Canal  Co. ;  Dimes  v.,  3  House  of  Lord  Cases,  759.  456 
Grogan;  M'Cormick  v.,  4  English  and  Irish  Appeals,  82 397 

Hamilton  ;  Dale  ».,  22  Eng.  Ch.  266 189 

Hemphill  v.  Lewis,  7  Bush,  214 250 

Heath  v.  Erie  B.  R.  Co.,  Fisk,  Gould,  el  ok,  8  Blatch.  347 430 

Herrington;  Bd.  of  Supervisors  Kane  Co.  v.,  50  Illinois,  232...  158 
Hewley's  Trusts,  Lady  (Shore  v.  Wilson),  9  Clarke  &  Fin.  355  450 

Hoare's  Trusts,  In  matters  of,  8  Giffard's  Ch.  254 403 

Hoffman  Coal  Co.  v.  Cumberland  Coal  Co.,  16  Md.  456 87 

Honore  v.  Hutchings,  8  Bush,  687 420 

Hodnon;  Roach  v.,  8  Bush,  410 418 

Hudson  ;  York  &  N.  Mid.  R.  R.  Co.  v.,  16  Beavan,  486 59 

Hutchings;  Honore  t>.,  8  Bush,  687 420 

Irwin  v.  Longworth,  20  Ohio  St.  581 n.425 

James  v.  Railroad  Co.,  6  Wallace,  752 289 

Jaudon  t>.  Nat.  City  Bank,  et  ah.,  8  Blatch.  430 379 

Jones  v.  Smith,  et  al.,  33  Miss.  215 194 

Kane  County  v.  Herrington,  et  ah.,  50  Illinois,  232 158 

Keyser  v.  Mitchell,  67  Penn.  Sta.  (17  P.  F.  Smith),  473 359 

Kilbreth  and  DeCamp  ;  Follansbe  v.,  17  Illinois,  522 180 

King  v.  Talbott,  el  ah.,  40  New  York  (Hand's),  76 322 

Klopp  v.  Moore,  et  al,  6  Webb's  Kansas,  27 369 

Lady  Hewley's  Trusts  (Shore  v.  Wilson),  9  Clarke  &  Fin.  355..  450 

Lewis;  Barclay  t>.,  67  Penn.  Sta.  (17  P.  F.  Smith),  316 362 

Lewis;  Hemphill  t>.,  7  Bush,  214 250 

Longcst's  Adm'r  v.  Tyler's  Ex'r,  1  Duvall's  Ky.  192 173 

Marsh  v.  Eastern  Counties  R.  R.  Co.,  40  New  Hamp.,  567 n.268 

M'Cormick  v.  Grogan,  4  Eng.  &  Iri*h  Ap.  (House  of  Lords),  82.  397 

M'Dunnell  v.  White,  11  House  of  Lords  Cases,  570 166 

M' I  uiy re  Poor-School  v.  Zanesvillo  C.  &  Manuf.  Co.,  9  Ohio,  203.  206 


TABLE  OF  CASES.  VII 


PAOI. 

Mackenzie;  York  Buildings  Co.  v n.85 

Michoud,  et  als.,  v.  Girod,  et  ah.,  4  Howard,  503 42 

Miller  v.  Chaplin's  Exrs.,  20  Ohio  Stat.  442 253 

Miller  v.  Edwards,  7  Bush,  394 n.308 

Milwaukee  &  Minn.  E.  E.  Co.;  James  v.,  6  Wallace,  752 289 

Mitchell;  Keyser  v.,  67  Penn.  Stat.  (17  P.  F.  Smith),  473 359 

Moore,  et  als.;  Klopp  v.,  6  Webb's  Kansas,  27 369 

Murrey,  Eeceiver,  v.  Vanderbilt,  39  Barbour,  140 103 

National  City  Bank,  et  als.;  Jaudon  v.,  8  Blatch.  430 379 

Ogden;  Gardner  v.,  22  New  York,  327 115 

Oliver,  Williams,  et  als.,  v.  Piatt,  3  Howard,  333 18 

Olyphant,  Ex.  of  King;  King  v.,  40  New  York  (Hand's),  76....  322 

Pettibone;  Wade  v.,  11  Ohio,  57 190 

Philadelphia;  Girard's  Heirs  v.,  7  Wallace,  1 238 

Piatt;  Oliver,  Williams,  et  als.,  v.,  3  Howard,  333 18 

Eailroad  Co.;  James  v.,  6  Wallace,  752 289 

Eoach  v.  Hudson,  8  Bush,  410 418 

Eoberts  v.  Eoberts,  7  Bush,  100 246 

Eostetter  and  wife  v.  Grant,  18  Ohio  Stat.,  126 293 

Seichrist's  Appeal,  66  Penn.  Stat.  (16  P.  P.  Smith),  237 365 

Sharkley  v.  Taylor,  et  al,  1  Bond's  Ct.  Ct.  142 373 

Sherman,  et  als.;  Cumberland  Coal  Co.  v.,  16  Maryland,  456  ...     87 

Same  Parties  30  Barbour,  553 «.87,  n.98 

Shore  v.  Wilson,  9  Clarke  and  Finnelly,  355 450 

Smith;  Jones  v.,  33  Mississippi,  215 194 

Smith  v.  Lansing,  22  New  York,  520 n.110 

Supervisors  Kane  Co.  v.  Herrington,  50  Illinois,  232 158 

Talbott,  et  als.;  King  v.,  40  New  York  (Hand's),  76 322 

Taylor,  et  al;  Sharkley  v.,  I  Bond's  Ct.  Ct.  142 373 

Trustees  M'Intyre  Poor-Sch'l  v.  Zans.  C.  &  Mfg.  Co.,  9  Ohio,  203.  206 
Tyler's  Exr.;  Longest's  Admr.  v.,  1  Duvall,  192 173 

Yanderbilt;  Murrey,  Eeceiver,  v.,  39  Barbour,  140 103 

Van  Epps  v.  Van  Epps,  9  Paige's  Ch.  241 n.176 

Van  Wert  Board  of  Ed.  v.  Van  Wert,  et  als.,  18  Ohio  Stat.  221..  338 
Vidal  v.  Girard's  Exrs.,  et  als.,  2  Howard,  127 214 

Wade  v.  Pettibone,  11  Ohio,  57 190 

Wall,  v.  Cockerell,  et  als.,  10  House  of  Lords  Cases,  229 388 

Walker,  In  the  matter  of  Hoare's  Trusts,  4  Giffard's  Ch.  254....  403 

Walker  v.  Walker's  Exr.,  9  Wallace,  743 310 

Warner  v.  Blakeraan,  41  New  York,  487 n.368 


VIH  TABLE  OF  CASES 


PAO*. 

Wash.  E.  E.  Co.  v.  Alex.  E.  E.  Co.,  19  Grattan,  592 268 

Webster  v.  Wedderburn,  18  Eng.  Ch.  (4  Mylne  &  Cr.)  40,  41...  348 

Wedderburn  v.  Wedderburn,  Jb 348 

Wensinger,  et  alt.,  v.  Bishop  Alemany,  40  California,  288 345 

White;  MDonnell  t>.,  11  House  of  Lords  Cases,  570 166 

Whitewater  Canal  Co.;  Goodin  v.,  18  Ohio  Stat.  169 125 

Whiting;  Baker,  et  a&.,  t>.,  3  Sumner's  Ct.  Ct.,  475 136 

Williams  v.  First  Presb.  Society,  1  Ohio  Stat.  478 n.343 

Williams  v.  Williams,  8  Bush,  241 407 

Winslow,  Trustees,  et  ah.;  Cov.  &  Lex.  E.  E.  Co.  v 466 

York  &  N.  Mid.  E.  E.  Co.  v.  Hudson,  16  Beavan,  486 59 

York  Buildings  Co.  v.  Mackenzie n.85 

Zanesville  C.  &  Mfg.  Co.;  Mlntyre  Poor-School  v.,  9  Ohio,  203.  206 
Zirkenbach ;  Seichrist  t>.,  66  Penn.  Sta.  (16  P.  F.  Smith),  237.  365 


LEADING. AND  SELECTED  CASES 


ON 


TRUSTS. 


DAVOUE  v.  FANNING,  ANN  HIS  WIFE,  AND  OTHERS. 

[This  case  was  decided  by  the  Court  of  Chancery  of  the  State  of  New 
York,  in  1816;  JAMES  KENT,  Chancellor.'  Reported  in  2  Johnson 's  Chan- 
cery Reports,  252.] 

A  testator  bequeathed  legacies  to  each  of  his  seven  children,  "to  be  paid  out  of 
the  bulk  of  his  estate;"  and  if  his  executors  found  that  the  estate  fell  short 
of  the  amount  of  legacies,  then  they  were  to  make  an  abatement  in  propor- 
tion ;  and  he,  afterward,  directed  that  so  much  of  his  real  estate  as  should 
be  necessary  to  furnish  the  sums  bequeathed,  should  be  sold  at  public  auc- 
tion, when  his  children  should  attain  full  age,  and  the  remainder  be  leased 
by  his  executors ;  and  that  when  the  youngest  child  arrived  at  full  age,  all 
his  real  estate  and  property,  not  otherwise  disposed  of,  should  be  sold,  and 
the  proceeds,  with  the  amount  of  the  personal  property,  be  divided  among 
the  children,  etc.  It  was  held,  that  the  sole  acting  executor  had  power  to 
sell  the  real  estate  under  the  will. 

If  a  trustee,  or  person  acting  for  others,  sells  the  trust  estate,  and  becomes  him- 
self interested  in  the  purchase,  the  cestui  que  trusts  are  entitled,  as  of  course, 
to  have  the  purchase  set  aside,  and  the  property  re-exposed  to  sale,  under 
the  direction  of  the  Court.  And  it  makes  no  difference  in  the  application 
of  the  rule,  that  a  sale  was  at  public  auction,  bona  fide,  and  for  a  fair  price, 
and  that  the  executor  did  not  purchase  for  himself,  but  a  third  person,  by 
previous  arrangement,  became  the  purchaser,  to  hold  in  trust  for  the  sepa- 
rate use  and  benefit  of  the  wife  of  the  executor,  who  was  one  of  the  cestui 
que  trusts,  and  had  an  interest  in  the  land  under  the  will  of  the  testator. 

THE  plaintiff  is  an  infant  daughter  of  Frederick  Davoue, 
deceased,  who,  by  his  last  will,  bequeathed  to  her,  and  her  sis- 
ter Ann  (one  of  the  defendants,  and  wife  of  the  defendant  Fan- 
ning), $5,000  each,  "  to  be  paid  out  of  the  bulk  of  the  prop- 
erty," when  they  should  become  of  age,  or  marry.  The  testator 

i  i  —  l 


DAVOUE  v.  FANNING  AND  OTHERS, 


directed,  that  so  much  of  his  real  estate  as  should  be  necessary 
to  furnish  the  suras  he  had  therein  before  bequeathed  to  his 
children,  should  be  sold  at  public  auction  when  his  children 
should  attain  to  full  age,  etc.,  and  the  remainder  of  his  real 
estate  to  be  leased  or  rented,  by  his  executors. 

The  bill  charged,  that  the  defendant  Fanning,  the  sole  act- 
ing executor,  pretending  that  the  personal  estate  was  insufficient 
to  pay  the  debts  and  legacies,  sold  a  lot  of  ground  in  New  York, 
though  he  had  no  authority  by  the  will  to  do  so,  and  that  he 
caused  the  same  to  be  purchased  by  Hedden,  the  defendant,  for 
himself,  or  in  trust  for  his  wife,  the  said  Ann,  which  was  not 
lawful,  and  to  the  injury  of  the  plaintiff;  and  that  since  the 
sale,  Fanning,  the  defendant,  had  caused  buildings  to  be  erected 
on  the  lot,  and  on  the  25th  August,  1815,  mortgaged  the  prop- 
erty to  the  defendant  Ashfield,  to  secure  $3,000,  payable  in  one 
year,  which  sum  was  borrowed  toward  paying  the  expense  of 
the  buildings.  The  bill  prayed,  that  the  sale  of  the  lot  might 
be  set  aside,  and  the  premises  resold,  etc. 

The  answer  stated,  that  there  was  not  property  enough  to 
pay  the  debts  and  legacies ;  and  that  Fanning  was  the  sole  act- 
ing executor  of  the  testator,  and  that  he  caused  the  lot  to  be 

i  at  auction,  as,  he  alleged,  he  had  authority  to  do  under 
the  will.  That  to  secure  to  the  defendant  Ann  her  legacy,  for 
her  and  her  children,  independent  of  her  husband,  she  and  her 
husband  requested  the  defendant  Hedden  to  attend  the  sale  at 
auction,  and  purchase  the  lot  for  her,  if  it  should  be  sold  for 
less  than  $4,000;  that  the  defendant  Hedden  attended  the 
sale  and  bought  the  lot  for  $3,800,  for  the  said  Ann;  and  the 
answer  denied  that  the  defendant  Fanning  had  any  other  or 
further  concern  in  the  purchase,  which  the  defendants  insisted 
was  correct  and  proper,  and  in  no  way  injurious  to  the  plaintiff. 
That  the  defendant  Fanning,  as  sole  acting  executor,  on  the 
f  July,  1815,  executed  a  deed  for  the  lot  to  Hedden,  in 
trust  for  the  sole  and  separate  use  of  the  defendant  Ann,  and  to 
c  at  her  own  disposal.  That  Fanning  received  no  money  or 
•ther  consideration,  but  only,  as  executor,  credited  the  $3,800 
count  of  the  legacy  due  to  his  wife.  That  the  defendant 
Ann  has  erected  the  buildings  on  the  lot,  and  she  and  Hedden, 


IN  THE  COURT  OF  CHANCERY  OF  NEW  YORK.      3 

and  the  defendant  Fanning,  in  her  behalf,  mortgaged  the  prem- 
ises to  the  defendant  Ashfield,  for  $3,000,  payable  in  one  year 
froin  the  25th  of  August,  1815,  for  which  they  gave  their  joint 
bond ;  that  the  whole  of  the  money  borrowed  was  applied  to- 
Avard  the  cost  of  the  buildings,  and  that  about  $2,500  still 
remains  due  for  the  expenses  of  the  buildings.  The  defendants 
insisted  that  the  mortgage  was  valid,  and  ought  first  to  be  paid, 
and  the  residue  of  the  moneys  due  ought  to  be  charged  on  the 
lot,  if  the  sale  should  be  rescinded ;  or  if  the  defendant  Fanning 
is  to  be  responsible  for  the  sums  due,  the  defendant  Ann  ought 
to  hold  the  property ;  but  that  if  the  property  is  resold,  so  much 
of  the  proceeds  as  belong  to  her  ought  to  be  appropriated  for 
her  separate  use,  etq. 

The  cause  came  on  to  be  heard  on  the  bill  and  answer. 

Van  Wyck,  for  plaintiff.     T.  A.  Emmet,  for  defendants. 

THE  CHANCELLOR.  1.  The  first  question  arising  upon  this 
case  is,  whether  the  sole  acting  executor,  who  was  the  defend- 
ant Henry  Fanning,  was  authorized  under  the  will,  without  the 
direction  of  this  Court,  to  sell  any  part  of  the  real  estate. 

If  all  the  executors  named  had  the  power  by  the  will,  then 
the  sole  acting  executor  has  the  power  by  the  statute  (N.  R.  L., 
vol.  1,  p.  366),  on  the  neglect  or  refusal  of  the  rest  of  the 
executors  to  act. 

The  will  directs  that  the  real  estate  be  sold  at  public  vendue, 
when  it  shall  become  necessary  to  raise  money  for  the  legacies, 
or  when  all  the  children  are  of  age;  but  it  does  not  say  ex- 
pressly who  shall  sett,  though  I  think,  as  Lord  HARDWICKE  did 
in  a  case  somewhat  similar,  Black  v.  Wilier,  I  Atk.  420,  that 
it  is  a  very  reasonable  construction,  that  the  power  was  given 
to  the  executors.  It  seems  almost  impossible  to  mistake  the 
testator's  meaning  on  this  point.  He  directed  that  an  inventory 
of  the  real  and  personal  estate  should  be  taken  by  the  executors ; 
that  they  were  to  give  the  younger  children  such  education  as 
they  should  think  proper;  that  the  legacies  of  2,000?.  to  each 
of  the  seven  children,  were  to  be  paid  out  of  "the  bulk  of  the 
estate,"  as  they  should  respectively  become  of  age ;  and  that  if 
the  executors  should  find  that  "the  estate"  fell  short  of  the 
legacies,  they  were  to  make  a  deduction  and  apportionment, 


DAVOUE  v.  FANNING  AND  OTHERS, 


according  to  a  rule  prescribed.  The  testator  then  adds,  "I 
will  and  direct,  that  so  much  of  my  real  estate  as  shall  be 
necessary  to  furnish  the  sums  which  I  have  heretofore  be- 
queathed to  my  children,  shall  be  sold  at  public  vendue,  when 
they  shall  attain  the  full  age  to  possess  the  same,  and  the  re- 
mainder of  my  real  estate  to  be  leased  or  rented  by  my  execu- 
tors ;  and  that  when  my  youngest  child  shall  have  attained  unto 
full  age,  that  then  all  my  real  estate  and  property,  not  other- 
wise disposed  of,  be  sold,  etc.,  and  the  proceeds,  with  the  amount 
of  the  personal  property,  be  divided  among  the  children,"  etc. 

It  is  to  be  observed,  that  the  will  directs  that  the  personal 
property  be  immediately  sold,  and  the  proceeds  put  at  interest, 
etc.,  but  it  is  equally  silent  as  to  the  persons  who  are  to  sell  it. 

The  object  of  the  power  to  sell  was  to  raise  money  for  the 
legacies,  which  it  is,  of  course,  the  duty  of  the  executor  to  dis- 
charge ;  and  the  will  regulates  the  sale,  by  declaring  it  to  be  at 
public  auction,  which  it  would  not  have  dene,  if  it  was  intended 
that  the  sale  should  not  be  made  by  the  constituted  agents  of  the 
will,  but  under  the  directions  of  this  Court.  Indeed,  taking  the 
whole  will  together,  I  think  it  is  a  very  necessary  conclusion, 
that  the  executors  were  the  persons  intended  by  the  testator  to 
execute  the  power  to  sell. 

2.  The  next  and  principal  point  in  the  case  is,  whether  the 
plaintiff  is  not  entitled  to  set  the  sale  aside,  because  the  executor, 
by  a  previous  arrangement,  suffered  the  property  to  be  purchased 
in  for  his  wife,  and  executed  a  deed  in  pursuance  of  the  sale  in 
trust  for  her. 

It  is  contended,  on  the  part  of  the  defendants,  that  this  sale 
is  not  open  to  objection,  inasmuch  as  it  was  at  public  auction, 
and  botia  fide,  and  for  a  fair  price,  and  the  purchase  was  not 
made  for  the  benefit  of  the  executor  himself,  but  for  the*  benefit 
of  his  wife,  who  was  one  of  the  cestui  qite  trusts,  having  an  in- 
terest in  the  land.  But  I  am  of  opinion  that  these  circumstances 
do  not  vary  the  application  of  the  general  rule. 

The  executor,  in  selling  a  part  of  the  estate  to  raise  a  partic- 
ular legacy,  was  acting  as  a  trustee  for  all  those  who  were  inter- 
ested in  the  estate  under  the  will,  and  not  exclusively  for  the 
benefit  of  his  wife,  whose  particular  legacy  he  was  raising. 
The  plaintiff,  and  all  the  other  children,  had  an  equal  interest 


IN  THE  COURT  OF  CHANCERY  OF  NEW  YORK.      5 

with  the  defendant's  wife  that  the  property  should  be  sold  to  the 
best  advantage,  because  the  greater  the  price,  the  greater  would 
be  the  dividend  of  the  residuary  estate.  They  were  all  equally 
cestui  que  trusts  of  the  executor;  for  he  was  charged  with  the 
duty  of  applying  the  proceeds  of  the  estate  to  their  use,  and  of 
eventually  selling  the  whole  real  estate  for  distribution  among 
them.  If,  in  selling  a  part  of  the  estate,  in  the  mean  time,  for  a 
legacy  to  his  wife,  he  could  become  the  purchaser  on  her  account, 
or  constitute  an  agent  for  that  purpose,  the  temptation  to  abuse 
of  trust  would  be  great  and  dangerous.  Whether  a  trustee  buys 
in  for  himself  or  his  wife,  the  temptation  to  abuse  is  nearly  the 
same.  Though  the  money  he  was  raising  was  to  go  to  the  wife, 
it  was  no  reason  why  he  should  be  permitted  to  buy  in  for  her 
the  estate  itself,  when  the  plaintiff  and  others  had  also  legacies  to 
be  raised  out  of  the  estate,  and  were  equally  entitled  to  their 
share  of  what  should  be  remaining.  His  interest  here  interfered 
with  his  duty.  Emptor  emit  quam  minima  potest;  venditor  vendit 
quam  maxima  potest.  Indeed,  the  very  fact  that  the  executor 
was,  in  that  instance,  exercising  the  general  powers  of  his  trust 
for  the  benefit  of  his  wife,  was  peculiarly  calculated  to  touch  and 
awaken  the  suggestions  of  self-interest.  The  case,  therefore, 
falls  clearly  within  the  spirit  of  the  principle,  that  if  a  trustee, 
acting  for  others,  sells  an  estate,  and  becomes  himself  interested 
in  the  purchase,  the  cestui  que  trust  is  entitled  to  come  here,  as 
of  course,  and  set  aside  that  purchase,  and  have  the  property  re- 
exposed  for  sale. 

I  consider  this  to  be  a  sound  and  settled  doctrine  of  the  Court. 
But  as  the  point  is  extremely  important,  and  has  been  long  and 
greatly  agitated,  it  will  be  safer,  and  certainly  more  satisfactory 
to  the  parties,  that  I  should  not  only  lay  down  the  rule,  but  look 
into  the  authorities  on  which  it  is  supported. 

The  earliest  case  I  have  met  with,  containing  any  full  recog- 
nition of  the  principle,  that  a  trustee  can  not  act  for  his  own 
benefit  on  a  subject  connected  with  the  trust,  is  that  of  Holt  v. 
Holt,  in  the  22  Car.  II,  1  Ch.  Cas.  190,  where  it  was  held,  by 
the  Lord  Keeper  BRIDGMAN,  assisted  by  the  judges,  that  if  an 
executor  in  trust  renewed  a  lease,  it  should  be  for  the  benefit  of 
the  cestui  que  trust.  The  next  case  that  occurs  was  that  of 
KeecJi  v.  Sandford,  before  Lord  Ch.  KING,  in  1726,  3  Eq.  Cas. 


DAVOUE  v.  FANNING  AND  OTHERS, 


Abr.  741.  A  lease  of  the  profits  of  a  market  was  devised  to  a 
trustee,  in  trust  for  an  infant ;  before  the  expiration  of  the  term, 
the  trustee  applied  to  the  lessor  for  a  renewal  for  the  infant's 
benefit,  which  he  refused,  because  he  could  not  distrain,  but  .must 
rest  singly  on  covenant,  which  the  infant  could  not  make.  The 
trustee  then  took  a  lease  to  himself,  and  the  chancellor  decreed, 
that  the  lease  should  be  assigned  to  the  infant,  and  that  the  trus- 
tee should  be  indemnified  from  the  covenants  in  the  lease,  and 
the  trustee  account  for  the  profits  since  the  renewal.  He  said  he 
must  consider  it  a  trust  for  the  infant,  "  for  if  the  trustee,  on 
refusal  to  renew,  might  have  a  lease  to  himself,  few  trust  estates 
would  be  renewed  to  cestui  que  trusts;  and  though  it  might 
seem  hard  that  the  trustee  was  the  only  person  of  all  mankind 
who  might  not  have  the  lease,  yet  it  was  very  proper  that  the 
rule  should  be  strictly  pursued,  and  not  in  the  least  relaxed,  for 
it  was  very  obvious  what  would  be  the  consequence  of  letting 
trustees  have  the  lease  on  refusal  to  renew  to  cestui  que  trusts." 
If  we  go  through  all  the  cases,  I  doubt  whether  we  shall 
find  the  rule  and  the  policy  of  it  laid  down  with  more  clearness, 
strictness,  and  good  sense.  This  decision  has  never  been  ques- 
tioned ;  and  that  a  trust  results  on  the  renewal  of  an  infant's 
lease,  has  since  been  regarded  as  a  familiar  point,  1  Bos.  & 
^Pull.  370. 

The  general  principle  was  first  brought  before  Loi'd  HARD- 
WICKE,  in  Davison  v.  Gardner,  in  1743,  and  the  rule  was  ad- 
mitted with  rather  more  relaxation  than  is  tolerated  at  this  day, 
if  we  can  rely  upon  the  account  of  this  MS.  case,  as  it  is  va- 
riously stated  in  some  of  the  elementary  compilers;  1  Cruise's 
Dig.  551  ;  Sugden's  Law  of  Vendors,  436.  The  case  was  a 
purchase  of  a  feme  covert  of  her  interest  in  a  brew-house.  She 
acted  at  the  time  as  a /ewe  sole  in  respect  to  her  separate  estate, 
and  the  defendant,  who  purchased  of  her,  was  her  trustee.  The 
chancellor  would  not  set  aside  the  sale,  because  she  received  the 
full  value,  and  the  purchase  was  fair.  I  do  not  know  that  this 
case  differs,  in  this  respect,  from  the  later  decisions,  for  they  all 
allow  a  trustee  to  purchase  from  the  cestui  que  trust,  under  very 
special  and  guarded  circumstances,  amounting  to  a  fair  and  dis- 
tinct dissolution  of  the  trust  connection  between  them,  at  the 
time  of  the  purchase.  Lord  HAKDWICKE  observed,  that  the 


IN  THE  COURT  OF  CHANCERY  OF  NEW  YORK.      7 

court  always  looks  with  a  jealous  eye  at  a  trustee  purchasing  of 
his  cestui  que  trust;  and  he  would  not  permit  any  purchase,  by  a 
trustee,  during  the  minority  of  the  cestui  que  trust ;  but  he  said, 
that  where  there  was  a  decree  for  the  sale  of  the  trust  estate, 
and  an  open  auction  by  the  master,  or  a  public  sale,  by  procla- 
mation, in  the  country,  there  the  court  had  permitted  a  trustee 
to  purchase,  by  refusing  to  set  aside  the  sale,  when  all  other  cir- 
cumstances were  fair.  I  apprehend  these  latter  dicta  are  clearly 
overruled,  and  that  whether  the  cestui  que  trust  be  an  infant  or 
an  adult,  and  whether  the  sale  be  public  or  private,  the  trustee 
is  equally  disabled  from  becoming  a  purchaser  of  the  trust  estate. 
The  next  case  before  Lord  HARDWICKE  was  that  of  Wlielpdale 
v.  Cookson,  in  1747,  1  Vesey,  9;  5  Vesey,  682,  S.  C.  That 
was  a  bill  by  a  creditor  against  the  defendants,  as  executors  and 
trustees.  The  answer  admitted  a  purchase  at  auction  of  part 
of  the  estate,  and  the  chancellor  would  not  suffer  it  to  stand,  as 
he  said  he  knew  the  dangerous  consequence,  and  that  it  was  not 
enough  for  the  trustee  to  say  you  can  not  prove  any  fraud,  for  it 
is  in  his  own  power  to  conceal  it.  He,  therefore,  ordered  the 
creditors  to  elect,  whether  they  would  abide  by  the  purchase; 
and  declared,  that  if  a  majority  elected  not  to  abide  by  it,  he 
would  order  a  resale  by  the  master. 

This  case  corrects  the  inaccurate  dictum  in  the  preceding 
one,  that  a  sale  at  auction  took  away  the  objection,  and  it  lays 
down  the  rule,  and  the  remedy,  in  clear  and  precise  terms.  The 
only  thing  to  be  objected  to  in  the  report  of  the  case  is,  that  the 
remedy  should  be  made  to  depend  upon  the  will  of  a  majority  of 
the  cestui  que  trusts;  for  this  is  not  only  questioned  in  the  later 
cases,  but  seems  contrary  to  the  settled  rights  of  parties,  for  one 
cestui  que  trust  has  no  power  to  control  or  give  away  the  right 
of  another. 

The  case  of  Fox  v.  Mackreth,  which  arose  before  Lord 
THURLOW,  in  1788,  2  Bro.  400;  6  Vesey,  627;  9  Vesey,  247, 
and  underwent  long  and  great  discussion,  is  important  only  to 
show  the  solidity  and  value  of  the  principle,  that  a  trustee  can 
not  be  permitted  to  purchase,  even  of  his  adult  cestui  que  trust, 
unless  he  has  first  fairly  discharged  himself  from  his  office  of 
trustee,  and  placed  himself  in  circumstances  to  make  a  fair 
contract.  This  is  the  same  doctrine  which  had  been  intimated 


8  DAVOUE  v.  FANNING  AND  OTHERS, 

by  Lord  HARDWICKE,  in  Ayliffe  v.  Murray,  2  Atk.  59.  But 
in  Whichcote  v.  Lawrence,  3  Vesey,  740,  Lord  ROSSLYN  seems 
to  have  spoken  with  a  carelessness  and  latitude  of  expression, 
which  has  given  occasion  to  much  criticism  in  the  subsequent 
cases.  An  estate  was  conveyed  to  trustees,  to  sell  for  the  ben- 
efit of  creditors;  the  estate  was  put  up  at  auction,  and  the 
defendant  (one  of  the  trustees)  purchased  two  lots,  for  which 
he  received  deeds  from  the  other  trustees,  and  he  afterward 
resold  his  lots  at  a  profit.  The  bill  was  by  three  only  of  the 
numerous  creditors,  praying  that  this  trustee  might  account  for 
the  profit  he  had  so  made,  and  it  was  so  decreed,  with  costs. 
It  is  to  be  observed,  that  relief  was  here  granted  to  a  minority 
of  the  creditors,  and  it  is  not  the  decree,  but  the  observations 
of  the  chancellor,  that  are  deemed  inaccurate.  He  said  the 
trustee  had  here  made  a  profit,  and  he  did  not  recollect  a  case, 
in  which  the  mere  abstract  rule  came  distinctly  to  be  tried,  ab- 
stracted from  the  consideration  of  advantage  made  by  the  pur- 
chaser. That  the  proposition  was  not  true,  that  where  the  trustee 
to  sell  was  the  purchaser,  the  sale  was,  ipso  jure,  null.  That 
the  real  sense  of  the  proposition  was,  that  the  trustee  to  sell 
should  not  gain  any  advantage  by  being  himself  the  person  to 
buy.  That  he  is  not  to  be  permitted  to  gain  profit  by  the  exe- 
cution of  the  trust ;  that  unless  the  advantage  be  made,  the 
purchase  will  never  be  questioned,  and  that  it  was  not  true  as 
a  naked  proposition,  that  a  trustee  can  not  buy  of  his  cestui 
que  trust. 

The  objection  to  most  of  these  observations  is,  that  they  do 
not  place  the  question  on  the  true  principle.  However  inno- 
cent the  purchase  may  be  in  the  given  case,  it  is  poisonous  in 
its  consequences.  The  cestui  que  trust  is  not  bound  to  prove,  nor 
is  the  court  bound  to  judge,  that  the  trustee  has  made  a  bargain 
advantageous  to  himself.  The  fact  may  be  so,  and  yet  the  party 
not  have  it  in  his  power,  distinctly  and  clearly,  to  show  it. 
There  may  be  fraud,  as  Lord  HARDWICKE  observed,  and  the 
party  not  able  to  prove  it.  It  is  to  guard  against  this  uncer- 
tainty and  hazard  of  abuse,  and  to  remove  the  trustee  from 
temptation,  that  the  rule  does  and  will  permit  the  cestui  que 
trust  to  come,  at  his  own  option,  and  without  showing  actual 
injury,  and  insist  upon  having  the  experiment  of  another  sale. 


IN  THE  COURT  OF  CHANCERY  OF  NEW  YORK.      9 

This  is  a  remedy  which  goes  deep,  and  touches  the  very  root 
of  the  evil.  It  is  one  which  appears  to  me,  from  the  cases 
which  have  been  already  cited,  and  from  those  which  are  to 
follow,  to  be  most  conclusively  established. 

In  Campbell  v.  Walker,  5  Vesey,  678;  13  Vesey,  600, 
Lord  ALVANLEY,  then  master  of  the  rolls,  declared,  that  the. 
rule  necessarily  existed  to  this  extent.  That  was  a  devise  of 
real  estate  to  the  trustees  to  sell.  They  sold  at  auction,  and 
bought  in  a  part  for  themselves,  at  a  fair  price.  There  was  no 
proof  that  the  purchase  was  at  an  undervalue,  or  that  the  sale 
was  not  bona  fide  and  regular.  The  bill  was  in  behalf  of  resid- 
uary legatees,  then  infants,  to  have  the  sale  set  aside,  and  the 
lands  resold.  It  was  accordingly  so  decreed;  and  the  master 
of  the  rolls  said,  that  the  rule  did  go  to  the  extent,  that  the  cestui 
que  trust  had  a  right  to  set  aside  the  purchase,  and  have  the 
estate  resold,  if  he  chose  to  say,  in  any  reasonable  time,  that 
he  was  not  satisfied  with  it.  The  trustee  purchases  subject  to 
that  equity.  He  buys  with  that  clog.  The  only  way  for  a 
trustee  to  purchase  safely,  if  he  is  willing  to  give  as  much  as 
any  one  else,  is  by  filing  a  bill,  and  saying,  so  much  is  bid, 
and  I  will  bid  more,  and  the  court  will  then  examine  into  the 
case,  and  judge  whether  it  be  advisable  to  let  the  trustee  bid. 
In  that  way  the  court  will  divest  him  of  his  character  of  trustee, 
and  prevent  all  the  consequences  of  his  acting  both  for  himself 
and  for  the  cestui  que  trust.  In  no  other  way,  as  he  observed, 
could  the  trustee  become  the  purchaser,  without  being  liable  to 
be '  called  upon  to  give  up  his  purchase.  It  is  impossible  to 
know  whether  any  advantage  has  been  gained  by  the  purchase, 
or  whether  the  trustee  did  all  he  ought  to  have  done.  In  that 
very  case,  he  still  retained  the  land,  the  defendants  were  still 
trustees,  and  if  the  plaintiffs  elected  to  have  the  premises  resold, 
they  must  be  resold. 

When  this  cause  was,  afterward,  brought  before  Lord  ELDON, 
on  the  master's  report  of  the  sale,  the  infants  recovered  their 
costs ;  and  he  observed,  that  a  trustee  for  sale  could  not  con- 
tract with  the  cestui  que  trust,  until  he  had  distinctly  and 
honestly  removed  himself  from  the  relation  of  trustee,  which 
could  not*  have  been  done,  in  that  case,  as  the  cestui  qiie  trusts 
were  infants.  He  said  that  a  sale  by  auction  made  no  solid 


10          DAVOUE  v.  FANNING  AND  OTHERS, 

difference,  as  the  auctioneer  was  an  agent  employed  by   the 
vendor. 

It  appears  to  me,  that  the  observations  of  Lord  ALVANLEY, 
in  the  above  case,  illustrate  the  true  rule  and  the  reason  of  it, 
in  a  forcible  and  perspicuous  manner ;  yet  it  would  seem  that 
he  acted  in  direct  contradiction  to  his  own  opinion,  for  he  first 
directed  an  inquiry,  by  a  master,  whether  a  resale  would  be  for 
the  benefit  of  the  infants.  This  was  shaking  the  principle  itself. 
There  was  hazard  in  the  inquiry,  and  it  was  far  from  checking 
such  sales.  Lord  ELDON  expressed  his  disapprobation  of  the 
inquiry ;  and  it  was  certainly  an  instance  of  surprising  inconsis- 
tency between  the  reasoning  and  the  conclusion. 

Lord  ROSSLYN,  in  the  case  ex  parte  Reynolds,  5  Vesey,  707, 
seemed  to  adopt  the  true  rule,  that  a  trustee  can  not  purchase 
without  being  exposed  to  a  resale.  In  that  case,  the  assignee  of 
a  bankrupt  purchased  at  auction  the  estate  of  a  bankrupt,  under 
the  commission,  and  the  chancellor  ordered  the  estate  to  be  set 
up  again,  and  that  if  it  did  not  sell  for  more  than  he  gave,  the 
purchase  was  to  stand. 

I  proceed  next  to  the  decisions  by  Lord  ELDON,  which  are 
uniform  in  support  and  vindication  of  the  rule.  They  leave  no 
possible  doubt  on  the  subject.  Thus,  in  the  case  ex  parte  Laccy, 
G  Vesey,  625,  the  assignee  of  a  bankrupt  was  purchaser  of 
part  of  his  estate,  and  the  chancellor  declared,  that  when  a 
trustee  undertakes  to  manage  for  others,  he  undertakes  not  to 
manage  for  his  own  benefit ;  that  he  can  not  buy  until,  by  a 
new  contract  with  his  ccstui  que  trust,  he  has  stripped  himself 
of  his  character  of  trustee;  but  even  this  new  contract  is 
watched  with  infinite  and  the  most  guarded  jealousy,  'because 
he  may  have  acquired  information,  as  trustee,  which  the  court 
can  not  be  certain  he  has  communicated  to  the  ccstui  que  trust. 
He  disavows  the  interpretation  of  Lord  ROSSLYN,  that  the  trus- 
tee must  make  advantage.  Whether  he  makes  advantage  or 
not,  if  the  connection  does  not  satisfactorily  appear  to  be  dis- 
solved, it  is  in  the  choice  of  the  cestui  que  trust,  whether  or  not 
he  will  take  back  the  property.  The  ground  of  the  rule  is,  that 
though  you  may  see,  in  a  particular  case,  that  he  has  not  made 
advantage,  it  is  impossible  to  examine  sufficiently,  in  ninety-nine 
cases  out  of  a  hundred,  whether  he  has  made  advantage  or  not. 


IN  THE  COURT  OF  CHANCERY  OF  NEW  YORK.      11 

In  this  case,  another  sale  was  ordered,  and  the  premises 
were  directed  to  be  put  up  at  the  price  the  assignee  gave,  and 
if  no  more  was  bid,  the  purchase  was  to  stand. 

In  another  case,  ex  parte  Hughes,  6  Vesey,  617,  Lord 
ELDON  thought  that  a  creditor  of  the  bankrupt,  or  any  agent  of 
the  sale,  was  within  the  reason  of  the  rule,  and  could  not  be 
permitted  to  bid ;  and  in  this  case  he  ordered  the  property  to  be 
set  up  for  resale,  at  the  price  the  creditor  gave,  together  with 
the  amount  of  his  bona  fide  and  substantial  improvements, 
which  were  to  be  allowed  him,  and  that  if  the  property  sold  for 
more,  he  should  be  paid  for  his  improvements  out  of  the  pur- 
chase-money, and  if  not,  that  he  should  be  held  to  his  purchase. 
This  rule  of  setting  aside  the  purchase  by  the  trustee,  at /the 
option  of  the  cestui  que  trust,  and  of  directing  a  resale,  upon 
the  condition  that  the  property  produces  a  better  price,  was 
afterward  adopted  by  Sir  WILLIAM  GRANT,  in  Lester  v.  Lester, 
6  Vesey,  631,  and  he  said  the  rule  was  so  established  in  Lord 
THUKLOW'S  time. 

The  case  ex  parte  James,  8  Vesey,  337,  contains  a  still 
further  illustration  and  confirmation  of  the  rule.  It  was  there 
applied  to  a  purchase,  at  auction,  by  a  solicitor  to  the  bankrupt 
commission,  who  was  considered,  as  well  as  the  assignees,  to 
come  within  the  mischief  to  be  prevented;  and  he  explicitly 
declared,  that  he  did  not  proceed  upon  the  ground  of  under- 
value or  want  of  fairness  in  the  purchase,  but  upon  the  general 
principle.  This  case  is  deserving  of  notice,  in  another  respect, 
for  it  may  be  considered  as  overruling  the  dictum  or  decision  of 
Lord  HARDWICKE,  that  a  majority  of  the  cestui  que  trusts  was 
sufficient  to  ratify  the  purchase  of  the  trustee ;  for  Lord  ELDON 
declared,  that  the  solicitor  was  not  entitled  to  hold  the  land 
against  the  consent  of  any  of  these  persons  entitled  to  the  sur- 
plus of  the  estate.  He  had  said,  also,  in  another  place,  6 
Vesey,  625,  that  he  held  that  opinion  of  Lord  HARDWICKE  to 
be  erroneous. 

In  the  case-  ex  parte  Bennett,  10  Vesey,  385,  Lord  ELDON 
went  again,  and  at  large,  into  the  policy,  the  necessity,  and 
the  authority  of  the  principle  which  we  are  considering.  I 
need  not  repeat  the  argument,  though  I  think  that,  in  that  case, 
he  dwelt  upon  the  subject  with  uncommon  interest  and  vigor 


12          DAVOUE  v.  FANNING  AND  OTHERS, 

of  decision.  He  applied  the  rule  once  more  to  the  solicitor  to 
a  commission  of  bankruptcy,  and  to  the  commissioner  purchas- 
ing for  himself  or  for  another.  To  permit  either  to  bid,  would 
be  applying  the  information  acquired  by  their  trust  to  their  own 
benefit.  He  said  it  was  settled,  that  it  was  not  requisite  to 
show  that  the  trustee  had  made  any  advantage  by  the  purchase. 
If  a  trustee  can  buy  in  an  honest  case,  he  may  in  a  case  having 
that  appearance,  but  which,  from  the  infirmity  of  human  testi- 
mony, may  be  grossly  otherwise;  and  yet  the  power  of  the  court 
would  not  be  equal  to  detect  the  deception.  Human  infirmity 
will  rarely  permit  a  man  to  exert  against  himself  that  providence 
'which  a  vendor  ought  to  exert,  in  order  to  sell  the  estate  most 
advantageously  for  the  ccstui  que  trusts,  and  which  a  purchaser 
is  at  liberty  to  exert  for  himself,  in  order  to  purchase  at  the 
lowest  price.  If  the  trustee  can  not  bid  for  himself,  he  can  not, 
on  the  same  principle,  bid  for  another.  The  distinction  of  its 
being  a  weaker  temptation,  is  too  thin  to  form  a  safe  rule  of 
justice.  The  decree  there  was,  also,  that  the  expense  of  the 
lasting  repairs  and  substantial  improvements,  made  subsequent 
to  the  purchase,  should  be  added'  to  the  purchase-money,  and 
the  estate  put  up  again  at  the  accumulated  sum. 

In  Itandall  v.  Erington,  10  Vesey,  423,  the  sale  was  fair, 
and  the  purchase  by  the  trustee,  at  auction,  for  a  full  price ; 
but  he  had  subsequently  sold  a  part,  at  some  profit,  and  the 
court  opened  the  sale  at  the  request  of  the  cestui  que  trust,  as 
to  the  parts  not  sold,  and  held  the  trustee  to  account  for  the 
profit  on  the  part  he  had  sold. 

It  remains  only  to  observe,  that  during  the  time  that  Lord 
EKSKIXE  presided  in  the  Court  of  Chancery,  he  gave  the  most 
unequivocal  sanction  to  these  doctrines,  and  declared  that  they 
were  founded  on  the  clearest  principles  of  equity,  and  the  gen- 
eral security  of  contracts,  Morse  v.  Eoyal,  13  Vesey,  355; 
.Lotcthcr  v.  Lowther,  12  Vesey,  95.  He  went  so  far  as  to  say, 
that  there  was  so  much  difficulty  in  supporting  a  purchase  by  a 
trustee,  even  from  his  cestui  que  trust,  and  it  required  to  be 
guarded  with  so  much  jealousy,  that  it  would  have  been  better 
to  have  interdicted  it  altogether.  Indeed,  no  person  could  have 
expressed  himself  in  stronger  language,  as  to  the  delicacy  and 
danger  of  SMC/I  purchases,  than  Lord  ELDON  himself  did  on 


IN  THE  COURT  OF  CHANCERY  OF  NEW  YORK.     13 

repeated  occasions,  Coles  v.  Trecothick,  9  Vesey,  234;  ex  parte 
Bennett,  10  Vesey,  385. 

It  is  proper  to  observe  here,  that  this  whole  chancery  doctrine 
has  received  the  entire  approbation  and  sanction  of  the  Supreme 
Court  of  Pennsylvania,  3  Binney,  54 ;  4  Binney,  43.  Those 
decisions  come  with  the  more  force,  and  are  the  more  applicable 
as  authority,  when  we  consider  that  the  court  is  obliged,  from 
the  necessity  of  the  case  (as  they  have  no  chancery  tribunal), 
to  study,  adopt,  and  apply  equity  principles  more  freely  and 
more  liberally  than  is  usual  in  courts  of  law. 

The  same  doctrine,  has,  also,  been  recognized  in  our  own 
courts.  The  Supreme  Court,  in  Jackson  v.  Van  Dal/sen,  5  Johns. 
43,  admit  it  to  be  a  well-settled  rule  in  equity,  that  a  trustee, 
or  agent  to  sell,  shall  not,  himself,  become  the  purchaser ;  and 
they  very  properly  refer  the  remedy  of  the  cestui  que  trust  in  such 
cases  to  the  cognizance  of  chancery.  The  doctrine  underwent 
much  discussion  in  this  Court,  and  finally  the  Court  of  Appeals, 
in  Munro  v.  Allaire,  2  Caines's  Cas.  in  Er.,  183.  Allaire  was 
one  of  the  executors  of  Benjamin  Palmer,  deceased,  with  power 
to  sell  the  real  estate,  and  he  purchased  of  Mary  Palmer,  the 
widow  and  devisee,  and,  also,  one  of  the  executors,  her  right  in 
the  whole  estate.  She,  subsequently  to  this  purchase,  conveyed 
her  right  to  Munro  and  Sniffin,  and  a  bill  was  filed  by  Allaire 
for  a  specific  performance  of  his  agreement  with  Mary  Palmer, 
and  for  a  more  perfect  assurance  and  conveyance  of  her  right. 
The  purchase  was  charged  to  have  been  fairly  made,  after  long 
consultation,  in  which  she  was  assisted  by  a  friend ;  and  that 
Allaire  gave  a  full  price,  and  more  than  had  been  previously 
offered  by  another.  To  this  bill  Mary  Palmer  filed  a  demurrer, 
which  was  overruled  in  this  Court,  and  she  was  ordered  to 
answer.  From  this  decretal  order  an  appeal  was  brought,  and 
the  decree,  overruling  the  demurrer,  was  reversed  in  the  Court 
of  Appeals,  in  1796. 

This  decree  of  the  court,  in  the  last  resort,  assumed  the 
doctrine  of  the  general  disability  of  the  trustee  to  purchase  from 
the  cestui  que  trust.  It  was  not  intended  to  be  understood,  I 
presume,  of  an  absolute,  unqualified  disablity,  such  as  Lord 
EESKINE  was  willing  to  adopt;  for  there  were  circumstances 
relied  upon,  in  this  case,  to  show  that  neither  Mary  Palmer,  or 


14          DAVOUE  v.  FANNING  AND  OTHERS, 

her  friends,  were  acquainted  with  the  nature  or  extent  of  the 
rights  she  undertook  to  convey.  The  case  may,  therefore,  be 
considered  as  establishing  only  the  general  doctrine  in  Fox  v. 
Mackreth,  and  in  the  other  cases  which  I  have  noticed.  But  I 
allude  to  the  case  as  containing  a  full  recognition  of  the  general 
rule,  that  a  trustee  to  sell  can  not,  himself,  purchase.  The  only 
opinion  given  in  the  Court  of  Errors  (at  least,  the  only  one  pub- 
lished), is  that  of  Mr.  Justice  BENSON,  in  which  the  rule  is  laid 
down  in  these  broad  and  general  terms:  "It  is  a  principle,"  he 
says,  "  that  a  trustee  can  never  be  a  purchaser ;  and  I  assume 
it  as  not  requiring  proof,  that  this  principle  must  be  admitted, 
not  only  as  established  by  adjudication,  but  also  as  founded  in 
indispensable  necessity,  to  prevent  that  great  inlet  of  fraud,  and 
those  dangerous  consequences  which  would  ensue,  if  trustees 
might  themselves  become  purchasers,  or  if  they  were  not,  in 
every  respect,  kept  within  compass.  Although  it  may,  how- 
ever, seem  hard  that  the  trustee  should  be  the  only  person  of 
all  mankind  who  may  not  purchase,  yet,  for  very  obvious  con- 
sequences, it  is  proper  the  rule  should  be  strictly  pursued,  and 
not  in  the  least  relaxed." 

We  can  not  but  notice  the  precision  and  accuracy  with 
which  the  rule,  and  the  reason  of  it,  are  here  stated ;  but  the 
rule  appears  to  be  much  weakened  in  the  subsequent  part  of  the 
opinion. 

He  makes  a  distinction  to  show  that  the  rule,  thus  laid  down, 
is  not  to  be  understood  in  an  absolute,  unqualified  sense.  A 
trustee,  it  is  said,  is  never  to  be  assisted  in  this  Court,  by  giving 
effect  to  such  a  purchase  ;  but  it  docs  not  follow  that  chancery  is 
bound,  in  every  case,  and  of  course,  to  annul  such  a  purchase, 
on  the  application  of  the  cestui  que  trust.  His  words  are,  "  That 
it  is  not,  in  every  instance,  indispensable  that  all  the  cestui  que 
trusts  should  agree  to  waive  the  implied  fraud ;  it  may  be  suf- 
ficient for  a  majority,  or  such  other  number,  or  proportion  of 
them,  to  agree,  as  that,  according  to  the  circumstances  of  the 
case,  it  may  be  presumed  there  was  no  fraud  in  fact." 

It  appears  to  me,  with  great  submission,  that  the  learned 
judge  has,  in  these  observations,  wounded  the  time  principle 
which  he  had  before  so  clearly  declared.  I  presume  he  was 
misled  by  the  case  of  Whclpdalc  v.  CooJcson,  in  which  Lord 


IN  THE  COURT  OF  CHANCERY  OF  NEW  YORK.      15 

HARDWICKE  held  that  a  majority  of  the  cestui  que  trusts  were 
sufficient  to  establish  the  purchase,  whether  the  minority  were 
consenting  or  not,  and  which  case  has  been  repeatedly  ques- 
tioned, and,  in  practice,  overruled.  But  this  is  not  all.  He 
seems  to  think  the  court  are  only  to  be  satisfied  that  there  was 
no  fraud  in  fact ,  whereas  it  has  been,  again  and  again, 'decided, 
and  the  principle  pervades  the  whole  body  of  the  cases,  that 
the  inquiry  is  not  whether  there  was,  or  was  not,  fraud  in  fact. 
The  purchase  is  to  be  set  aside,  at  the  instance  of  the  cestui  que 
trust,  and  a  resale  ordered,  without  weighing  the  presumption 
of  fraud,  on  the  ground  of  the  temptation  to  abuse,  and  of  the 
danger  of  imposition  inaccessible  to  the  eye  of  the  court. 

In  addition  to  these  cases  in  our  own  courts,  I  may  refer  to 
the  statute  which  prohibits  a  sheriff,  or  other  officer  to  whom 
an  execution  is  directed,  from  purchasing  at  the  sale  under  it. 
This  is  in  affirmance  of  the  same  general  rule;  and  the  other 
statute,  which  allows  a  mortgagee,  selling  under  a  power,  to 
purchase  in  the  land,  provided  the  sale  be,  in  every  other  re- 
spect, regular  and  fair,  does,  by  that  very  exception,  recognize 
the  existence  of  the  rule  in  all  other  cases. 

There  is  one  case  more  on  this  subject  too  important  to  be 
omitted;  that  of  The  York  Buildings  Company  v.  Mackenzie, 
which  was  decided  in  the  English  House  of  Lords  in  1795,  on 
appeal  from  the  Court  of  Sessions  in  Scotland,  8  Bro.  P.  C.  by 
Tomlins.  App. 

That  case  is  a  complete  vindication  of  the  doctrine  I  am 
now  to  apply ;  and,  considering  the  eminent  character  of  the 
counsel  [for  the  appellants,  J.  Mansfield,  J.  Mackintosh,  E.  Dun- 
das;  for  respondent,  J.  Scot,  William  Grant,  W.  Adani]  who 
were  concerned,  and  who  have  since  filled  the  highest  judicial 
stations,  and  the  ability  and  learning  which  they  displayed  in 
the  discussion,  it  is,  perhaps,  one  of  the  most  interesting  cases, 
on  a  mere  technical  rule  of  law,  that  is  to  be  met  with  in  the 
annals  of  our  jurisprudence. 

The  appellants  were  an  insolvent  company,  and  their  estates 
were  sold  by  order  of  the  Court  of  Sessions,  at  a  public  judicial 
sale,  to  satisfy  creditors.  The  course  at  such  sales  is  to  set  up 
the  property  at  a  value  fixed  upon  by  the  court,  which  is  called 
the  upset  price,  and  which  is  founded  on  information  procured 


16          DAVOUE  v.  FANNING  AND  OTHERS, 

by  the  common  agent  of  the  court,  who  has  the  management  of 
all  the  outdoor  business  of  a  cause.  The  respondent  here  was 
the  common  agent  in  that  cause,  and  he  purchased  for  himself, 
at  the  upset  price,  no  person  appearing  to  bid  more,  and  the 
sale  was  confirmed  by  the  court ;  and  in  the  course  of  eleven 
years'  possession,  he  had  expended  large  sums  for  building  and 
improvements.  There  was  no  question  as  to  the  fairness  and 
integrity  of  the  purchase.  But  the  object  of  the  appellant  was 
to  set  aside  the  sale,  and  have  the  estates  sold  anew,  on  the 
ground  that  the  respondent,  being  the  common  agent  in  court, 
in  behalf  of  all  parties,  to  procure  information  and  attend  the 
sale,  was  in  the  nature  of  a  trustee,  and  so  disabled  to  purchase. 

The  reasons  of  the  House  of  Lords  for  setting  aside  the  sale 
are  not  given,  and  we  are  left  to  infer  them  from  the  argument 
upon  which  the  appeal  was  founded. 

The  appellants  contended,  that  the  common  agent  was  under 
a  disability  to  purchase,  arising  from  his  office  5  that  the  rule 
was  founded  in  reason  and  nature,  and  prevailed  wherever  any 
well-regulated  administration  of  justice  was  known ;  that  the 
disability  rested  on  the  principle  which  dictated  that  a  person 
can  not  be  both  judge  and  party,  and  serve  two  masters ;  that 
he  who  is  intrusted  with  the  interest  of  others,  can  not  be  allowed 
to  make  the  business  an  object  to  himself,  because,  from  the 
frailty  of  nature,  one  who  has  power  will  be  too  readily  seized 
with  the  inclination  to  serve  his  own  interest  at  the  expense  of 
those  for  whom  he  is  intrusted;  that  the  danger  of  temptation 
does,  out  of  the  mere  necessity  of  the  case,  work  a  disqualifica- 
tion ;  nothing  less  than  incapacity  being  able  to  shut  the  door 
against  temptation,  where  the  danger  is  imminent,  and  the  se- 
curity against  discovery  great ;  that  the  wise  policy  of  the  law 
had,  therefore,  put  the  sting  of  disability  into  the  temptation,  as 
a  defensive  weapon  against  the  strength  of  the  danger  which 
lies  in  the  situation;  that  the  parts  which  the  buyer  and  seller 
have  to  act,  stand  in  direct  opposition  to  each  other  in  point  of 
interest ;  and  this  conflict  of  interest  is  the  rock,  for  shunning 
which  the  disability  has  obtained  its  force,  by  making  that  per- 
son, who  has  the  one  part  intrusted  to  him,  incapable  of  acting 
on  the  other  side. 

Several  cases  were  referred  to  in  the  civil  law,  showing 


IN  THE  COURT  OF  CHANCERY  OF  NEW  YORK.      17 

clearly,  that  the  same  principle  had  a  deep  and  firm  foundation 
in  that  system,  and  was  most  extensively  applied,  as  for  instance, 
to  guardians,  tutors,  curators,  procurators,  judicial  officers,  and 
all  other  persons  who,  in  any  respect,  as  agents,  had  a  concern 
in  the  disposition  and  sale  of  the  property  of  others,  whether 
the  sale  was  public  or  private,  judicial  or  otherwise.  The  pas- 
sages to  this  purpose  are  to  be  found  in  the  Digest,  lib.  18,  tit. 
1,  ch.  34,  s.  7,  and  lib.  18,  tit.  1,  ch.  46,  and  in  lib.  26,  tit.  8, 
ch.  5,  s.  2. 

The  counsel  for  the  respondent  admitted  the  general  prin- 
ciple, and  contented  themselves  with  denying  its  application, 
holding  that  the  common  agent  was  not  to  be  considered,  in  that 
case,  and  in  respect  of  that  sale,  in  the  character  of  seller  or 
trustee. 

But  the  House  of  Lords  thought  otherwise,  and  set  aside  the 
sale,  ordering  the  purchaser  to  account  for  the  rents  and  occu- 
pation in  the  mean  time,  with  a  liberal  allowance  to  him  for  his 
permanent  improvements.  This  decision  certainly  carried  the 
doctrine  to  its  full  extent,  and  it  may  be  considered  as  a  high 
and  authoritative  sanction  given  to  the  reasoning  which  accom- 
panied the  appeal  (a). 

I  shall,  accordingly,  set  aside  this  sale,  upon  the  usual  terms. 

The  following  decree  was  entered : 

"  This  cause  being  submitted  by  the  counsel  for  the  respective 
parties,  upon  the  bill  and  answer,  and  the  same  being  duly  con- 
sidered, and  it  appearing  to  the  Court,  that  though  the  said 
Henry  Fanning,  as  sole  acting  executor,  etc.,  had  authority, 
under  the  will,  to  sell  the  lot  of  land  in  the  pleadings  mentioned, 
to  raise  the  legacy  due  to  his  wife ;  yet,  inasmuch  as  he  caused 
the  said  lot,  on  such  sale,  to  be  purchased  in  for  the  benefit  of 
his  wife  exclusively,  it  is  ordered,  etc.,  that  the  said  sale  to  the 
defendant  Hedden,  in  trust  for  the  wife  of  the  defendant  Fan- 
ning, be  set  aside,  and  vacated,  upon  the  following  conditions, 
viz.:  that  the  said  lot  be  re-exposed  to  sale,  at  public  auction, 
by  the  defendant  Henry  Fanning,  with  the  concurrence  and 
agency  of  one  of  the  masters  of  this  Court,  on  giving  four  weeks' 
notice  of  the  time  and  place  of  sale,  in  two  of  the  daily  papers 

(a)  For  a  further  history  of  The  York  Buildings  Company  case,  see  note  to 
The  Aberdeen  Railway  Company  v.  Blakie  Brothers,  hereinafter. 

2 


OLIVER  AND  OTHERS  v.  PIATT, 

printed  in  the  city  of  New  York.  That  the  said  lot  be  put  up  at 
the  sum  of  $9,600,  being  the  amount  of  the  former  sale,  together 
with  the  principal  and  interest  of  the  mortgage  since  charged 
thereon,  and  of  the  debts  incurred  for  substantial  improvements, 
and  if  the  said  lot,  with  the  improvements  thereon,  shall  not  sell 
for  more  than  the  said  sum,  $9,600,  the  sale  heretofore  made 
shall,  in  all  respects,  stand  confirmed ;  but  if  the  said  lot  shall  sell 
beyond  that  sum,  then  the  former  sale  shall  be  held  to  be  vacated, 
and  the  defendant  Henry  Fanning,  as  acting  executor  aforesaid, 
together  with  the  said  master,  shall  execute  a  deed  in  fee  to  the 
purchaser,  on  receiving  the  consideration-money,  which  moneys 
shall  be  received  by  the  said  master,  and  forthwith  thereafter 
brought  into  Court,  to  be  subject  to  its  further  disposition ;  and 
the  question  of  costs,  and  all  further  questions,  are,  in  the 
mean  time,  reserved  (a). 


WILLIAM   OLIVER,  MICAJAH  T.  WILLIAMS,  AND  OTHERS,  AP- 
PELLANTS, v.  ROBERT  PIATT. 

[  This  case  was  decided  by  the  Supreme  Court  of  the  United  States,  at 
its  January  Term,  1845,  Associate  Justice  JOSEPH  STORY  delivering  the 
opinion.  At  that  time  the  Court  was  composed  of  Chief  Justice  ROGER  B. 
TANEY,  and  Associate  Justices  JOSEPH  STORY,  JOHN  M'LEAN,  JAMES  M. 
WAYNE,  JOHN  CATRON,  JOHN  M'KINLEY,  PETER  V.  DANIEL,  and  SAMUEL 
NELSON.  Reported  in  3  Howard,  333.] 

ID  cases  of  trust,  where  the  trustee  has  violated  his  trust  by  an  illegal  conver- 
sion of  the  trust  property,  the  ctstui  que  trust  has  a  right  to  follow  the  prop- 
erty into  whosesoever  hands  he  may  find  it,  not  being  a  bonafide  purchaser  for 
»  valuable  consideration,  without  notice. 

Where  a  trustee  has,  in  violation  of  his  trust,  invested  the  trust  property  or  its 
proceeds  in  any  other  property,  the  cetlui  que  trust  has  his  option,  either  to 
hold  the  substituted  property  liable  to  the  original  trust,  or  to  hold  the  trus- 
tee himself  personally  liable  for  the  breach  of  trust. 

(a)  I  have  selected  this  as  worthy  to  be  the  first  in  this  collection  of  "Leading 
and  Selected  Cases  on  Trusts,"  because  it  still  stands  as  recognized  authority  and 
binding  in  equity,  as  well  as  because  of  the  valuable  citation  of  authorities  that 
it  contains,  and  the  weight  that  is  universally  conceded  to  the  opinions  of  the 
great  Chancellor  from  whom  it  emanated. — EDITOR. 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        19 

The  option,  however,  belongs  to  the  cestui  que  trust  alone,  and  is  for  his  benefit, 
and  not  for  the  benefit  of  the  trustee. 

If  the  trustee,  after  such  an  unlawful  conversion  of  the  trust  property,  should 
repurchase  it,  the  cestui  que  trust  may,  at  his  option,  either  hold  the  original 
property  subject  to  the  trust,  or  take  the  substituted  property  in  which  it  has 
betfn  invested,  in  lieu  thereof.  And  the  trustee,  in  such  case,  has  no  right  to 
insist  that  the  trust  shall,  upon  the  repurchase,  attach  exclusively  to  the 
original  trust  property. 

Where  the  trust  property  has  been  unlawfully  invested,  with  other  funds  of  the 
trustee,  in  other  property,  the  latter,  in  the  hands  of  the  trustee,  is  chargea- 
ble pro  tanto  to  the  amount  or  value  of  the  original  trust  property. 

What  constitutes  notice  of  a  trust? 

An  agent,  employed  by  a  trustee  in  the  management  of  the  trust  property,  and 
who  thereby  acquires  a  knowledge  of  the  trust,  is,  if  he  afterward  becomes 
possessed  of  the  trust  property,  bound  by  the  trust,  in  the  same  manner  as 
the  trustee. 

Where,  upon  the  face  of  the  title-papers,  the  purchaser  has  full  means  of  acquir- 
ing complete  knowledge  of  the  title  from  the  references  therein  made  to  the 
origin  and  consideration  thereof,  he  will  be  deemed  to  have  constructive  no- 
tice thereof. 

A  co-proprietor  of  real  property,  derived  under  the  same  title  as  the  other  pro- 
prietors, is  presumed  to  have  full  knowledge  of  the  objects  and  purposes  and 
trusts  attached  to  the  original  purchase,  and  for  which  it  is  then  held  for  their 
common  benefit. 

A  purchaser  by  a  deed  of  quitclaim  without  any  covenant  of  warranty,  is  not 
entitled  to  protection  in  a  court  of  equity  as  a  purchaser  for  a  valuable  con- 
sideration, without  notice;  and  he  takes  only  what  the  vendor  could  lawfully 
convey. 

A  warranty,  either  lineal  or  collateral,  is  no  bar  to  an  heir  who  does  not  claim 
the  property  to  which  the  warranty  is  attached  by  descent,  but  as  a  purchaser 
thereof. 

Whether  a  bill  in  equity  is  open  to  the  objection  of  multifariousness  or  not,  must 
be  decided  upon  all  the  circumstances  of  the  particular  case.  No  general 
rule  can  be  laid  down  upon  the  subject;  and  much  must  be  left  to  the  discre- 
tion of  the  court. 

The  objection  of  multifariousness  can  be  taken  by  a  party  to  the  bill  only  by  de- 
murrer or  plea  or  answer,  and  can  not  be  taken  at  the  hearing  of  the  cause. 
But  the  court  itself  may  take  the  objection  at  any  time — at  the  hearing  or 
otherwise.  The  objection  can  not  be  taken  by  a  party  in  the  appellate  court. 

Lapse  of  time  is  no  bar  to  a  subsisting  trust  in  real  property.  The  bar  does  not 
begin  to  run  until  knowledge  of  some  overt  act  of  an  adverse  claim  or  right 
set  up  by  the  trustee  is  brought  home  to  the  cestui  que  trust.  The  lapse  of  any 
period  less  than  twenty  years  will  not  bar  the  cestui  que  trust  of  his  remedy 
in  equity,  although  he  may  have  been  guilty  of  some  negligence,  where  the 
suit  is  brought  against  his  trustee,  who  is  guilty  of  the  breach  of  trust,  or 
others  claiming  under  him  with  notice. 

Where  exceptions  are  taken  to  a  master's  report,  it  is  not  necessary  for  the  court 
formally  to  allow  or  disallow  them  on  the  record.  It  will  be  sufficient  if  it 
appears  from  the  record,  that  all  of  them  have  been  considered  by  the  court, 
and  allowed  or  disallowed,  and  the  report  reformed  accordingly. 


20  OLIVER  AND  OTHERS  v.  PIATT, 

There  is  no  principle  of  the  common  law  which  forbids  individuals  from  asso- 
ciating together  to  purchase  lands  of  the  United  States  on  joint  account  at  a 
public  sale. 

Stanbcry  and  Eicing,  for  appellants.    Pirtle  and  Scott,  for  ap- 
pellees. 

Mr.  Justice  STORY  delivered  the  opinion  of  the  Court. 
This  is  the  case  of  an  appeal  from  the  decree  of  the  Circuit 
Court  of  the  district  of  Ohio,  sitting  in  equity,— rendered  in  fa- 
vor of  the  original  plaintiff,  and  it  is  brought  to  this  Court  by 
the  original  defendants,  who  are  now  the  appellants.  The  rec- 
ord is  exceedingly  voluminous,  and  the  facts  and  proceedings 
complicated  and  perplexed  by  a  variety  of  details.  A  general 
outline  of  the  leading  facts  is  given  in  the  printed  opinion  of 
the  court  below,  with  which  we  have  been  favored;  and  those 
facts  can  not  be  more  succinctly  stated  than  they  are  in  that 
summary — we  shall  therefore  avail  ourselves  of  it  upon  the  pres- 
ent occasion.  It  is  as  follows:  "In  the  Summer  of  1817,  the 
complainant,  in  connection  with  John  H.  Piatt,  William  M. 
Worthington,  and  Gorham  A.  Worth,  formed  an  association  to 
purchase  lands  of  the  United  States,  at  a  public  sale,  which  was 
shortly  to  take  place  at  Wooster,  in  this  State — and  the  com- 
plainant was  appointed  the  agent  of  the  company,  to  attend  the 
sale  for  that  purpose. 

"  Another  association  consisting  of  Martin  Baum,  Jesse 
Hunt,  Jacob  Burnet,  William  C.  Schenck,  William  Barr,  Wil- 
liam Oliver,  and  Andrew  Mack,  was  formed  for  the  same  object ; 
and  William  Oliver  and  William  C.  Schenck  were  appointed  its 
agents  to  attend  the  sale. 

"  Before  the  sale  took  place,  it  was  discovered  that  both 
companies  were  desirous  of  purchasing  the  same  tracts  of  land, 
and  the  agents  agreed  that  they  would  purchase  tracts  1,  2,  3, 
and  4,  at,  and  including  the  mouth  of  Swan  Creek,  in  the  United 
States  Reserve,  at  the  foot  of  the  Rapids  of  the  Miami ;  and  also 
Nos.  86  nnd  87  on  the  other  side  of  the  river,  opposite  the 
mouth  of  Swan  Creek,  for  the  joint  benefit  of  both  companies ; 
each  company  to  have  one-half  of  the  lands  purchased,  and  to 
pay  at  the  same  rate.  Nos.  8G  and  87  were  bid  off  by  Oliver, 
and  the  certificates  of  purchase  issued  to  him.  The  other  tracts 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        21 

were  bid  off  by  the  complainant,  and  the  certificates  of  purchase 
were  issued  in  the  names  of  the  association  represented  by  him. 

"  At  the  same  sale,  the  complainant,  in  behalf  of  his  com- 
pany, purchased  the  north-west  quarter  of  section  2,  township 
3,  the  south-west  quarter  of  the  same  section,  the  north-west 
quarter  of  section  3,  township  3,  and  also  the  south-east  and 
south-west  quarters  of  the  same  section,  in  said  reserve ;  and 
one-fourth  of  the  purchase-money  on  each  tract  being  paid,  cer- 
tificates of  purchase  were  made  out  in  the  names  of  the  company. 
And  the  other  agents  purchased  for  their  company,  at  the  same 
sale,  other  tracts  of  land. 

"  On  the  return  of  the  agents  to  Cincinnati,  their  acts  were 
ratified  by  both  companies.  One  company  was  designated  the 
Piatt  Company,  the  other  the  Baum  Company ;  and  the  union 
of  both,  in  regard  to  the  lands  jointly  purchased,  was  called  the 
Port  Lawrence  Company.  The  joint,  or  Port  Lawrence  Com- 
pany, having  made  their  purchase  with  the  view  of  laying  out 
a  town,  to  be  called  Port  Lawrence,  appointed  Baum  a  trustee, 
and  authorized  him  to  sell  lots,  and  do  other  things  in  relation  to 
his  agency,  for  the  benefit  of  the  company. 

"On  the  14th  August,  1817,  Baum  appointed  Oliver  his  at- 
torney, to  s'ell  lots  in  the  town  to  be  laid  out,  receive  the  money, 
and  give  certificates  of  sale,  in  the  nature  of  title-bonds,  to  the 
purchasers ;  and  he,  in  association  with  William  C.  Schenck, 
was  authorized  to  lay  out  the  town.  Baum,  and  also  the  pro- 
prietors, gave  to  Oliver  a  letter  of  instructions  in  relation  to  the 
plan  of  the  town  and  the  sale  of  the  lots,  etc.  By  the  conditions 
of  sale,  one-fourth  of  the  purchase-money  was  to  be  paid  down, 
and  the  residue  in  three  equal  annual  payments. 

"At  the  sale  of  lots,  the  sum  of  $855.33  was  received  by 
Schenck,  for  which  he  was  to  be  accountable  to  Baum. 

"At  the  sale,  Oliver  purchased  lots  223  and  224,  an  undi- 
vided half  of  which  he  afterward  conveyed  to  Baum,  and  they 
erected  a  warehouse  and  other  improvements  on  them. 

"In  August,  1818,  he  sold  one-half  of  his  interest  in  the 
Port  Lawrence  Company  to  William  Steele  and  William  Lytle  ; 
and  in  March,  1819,  he  sold  the  residue  of  his  interest  to  Mica- 
jah  T.  Williams,  one  of  the  defendants,  and  his  partner  Embre. 

"  By  the  reduction  of  the  price  of  the  public  lands,  and  the 


22  OLIVER  AND  OTHERS  v.  PIATT, 


pressure  of  the  times,  the  Port  Lawrence  Company  were  under 
the  necessity  of  relinquishing  to  the  United  States,  tracts  1  and 
2,  having  agreed  to  pay  for  the  same  about  $20,000 ;  and  of 
appropriating  the  money  paid  on  them  to  the  payment  in  full  of 
the  residue  of  the  tracts  purchased  by  them,  and  by  the  Baum 
and  Piatt  Companies  respectively.  In  pursuance  of  this  object, 
the  five  quarter-sections  purchased  by  the  Piatt  Company  were 
assigned  to  Baum,  the  17th  September,  1821  ;  and  on  the  same 
day,  tracts  numbered  1,  2,  86,  and  87,  purchased  in  the  name 
of  the  Piatt  Company  for  the  Port  Lawrence  Company ;  and 
also  tracts  3  and  4,  purchased  by  Oliver  for  the  same  company, 
were  assigned  to  Baum.  It  is  alleged  that  these  tracts  had  been 
previously  assigned  to  Baum,  of  which  there  is  no  evidence. 

"On  the  27th  September,  1821,  Baum,  through  his  agent, 
Micajah  T.  Williams,  one  of  the  defendants,  relinquished,  to  the 
United  States,  tracts  1  and  2.  On  these  tracts  there  had  been 
paid  the  sum  of  $4,817.55;  $1,372.34  of  this  sum  were  applied 
to  complete  the  payments  on  tracts  3,  4,  86,  and  87,  the  residue 
of  the  tracts  purchased  at  the  sale  by  the  Port  Lawrence 
Company.  From  the  relinquished  tracts,  there  still  remained 
§3,445.21.  Of  this  sura,  one-half  belonged  to  the  Piatt  Com- 
pany;  $1,248  were  applied  to  complete  the  payment  on  the  five 
quarter-sections,  which  left  a  balance  of  $474.60  still  due  to  the 
Piatt  Company  ;  but  which  was  applied  in  payment  of  lands  held 
by  the  Baum  Company. 

"  After  the  relinquishment  of  the  tracts  on  which  the  town 
had  been  laid  out,  the  purchasers  of  town  lots  claimed  a  return 
of  the  money  paid  by  them,  with  interest,  and  also  damages  for 
their  improvements. 

"On  the  10th  September,  1822,  Baum  gave  to  Oliver  a  cer- 
tificate, which  stated  there  was  due  him,  by  the  Port  Lawrence 
Company,  the  sum  of  $213.02,  which  he  refunded  to  purchasers 
of  lots,  by  the  request  of  the  company,  *  it  being  the  amount  due 
on  the  shares  originally  owned  by  John  H.  Piatt,  Robert  Piatt, 
G.  A.  Worth,  and  William  M.  Worthington.' 

'And  on  the  27th  August,  1823,  Oliver  having  made  out  an 
account  against  the  Port  Lawrence  Company,  for  money  paid 
by  him  to  purchasers  of  lots,  and  services  rendered  as  agent, 
Baura  admitted  his  account,  amounting  to  the  sum  of  $1,835.47; 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        23 

to  secure  the  payment  of  which,  Baum  executed  to  him  a  mort- 
gage on  tracts  3,  4,  86,  and  87.  The  payment  was  to  be  made, 
with  interest,  on  or  before  the  1st  of  January,  1824. 

"  The  7th  October,  1825,  Oliver  caused  an  attachment  to 
be  issued  by  the  clerk  of  Monroe  County,  in  the  Michigan  Ter- 
ritory, against  Baum  and  the  members  of  the  Piatt  Company, 
on  the  certificate  of  indebtment  given  by  Baurn.  This  attach- 
ment was  levied  on  four  of  the  five  quarter-sections  owned  by 
the  Piatt  Company,  and  such  proceedings  were  had  on  the  at- 
tachment as  to  obtain  an  order  of  sale  of  the  property  attached ; 
three  of  the  quarters  were  sold,  by  the  auditors  appointed,  for  the 
sum  of  $241.60,  to  Noble,  the  agent  of  Oliver.  Noble,  shortly 
afterward,  conveyed  these  tracts  to  his  principal. 

"  A  bill  to  foreclose  the  mortgage  given  to  Oliver  was  filed 
by  him  in  the  Supreme  Court  of  Michigan,  the  13th  October, 
1825.  And  a  final  decree  having  been  obtained,  the  mortgaged 
premises  were  sold,  by  the  assistant  register  of  the  Chancery 
Court,  to  Oliver,  the  1st  September,  1828,  for  $618.56. 

"  By  the  act  of  20th  May,  1826,  the  Secretary  of  the  Treas- 
ury was  authorized  to  select,  for  the  benefit  of  the  University 
of  the  Michigan  Territory,  a  certain  number  of  acres  of  the 
public  lands  within  the  territory)  and  he  selected  tracts  1  and  2, 
which  had  been  relinquished. 

"In  the  Summer  of  1828,  as  appears  from  the  report  of  the 
Committee  of  the  Trustees  of  the  University,  Oliver,  as  the  agent 
of  Baum  and  others,  proposed  to  exchange  certain  lands  owned 
by  Baum,  in  the  vicinity  of  Port  Lawrence,  or  any  of  the  public 
lands  subject  to  entry,  for  tracts  1  and  2,  on  which  the  town  of 
Port  Lawrence  had  been  laid  out. 

"A  law  of  Congress  was  passed,  authorizing  the  exchange, 
the  13th  January,  1830.  Previous  to  this,  Baum  assigned  to 
Oliver  the  final  certificates  for  the  tracts  he  purchased  under  the 
attachment,  and  also  under  the  decree  of  foreclosure ;  and  one 
of  the  quai'ter-sections  levied  on  by  the  attachment,  but  not  sold 
under  it,  in  payment  of  the  balance  of  the  judgment  on  the  at- 
tachment, which  enabled  Oliver  to  obtain  patents  for  the  same 
in  his  own  name.  And  on  his  conveying  to  the  University  tracts 
numbered  3  and  4,  except  ten  acres  reserved  of  number  3,  and 
the  north-west  quarter  of  section  2,  township  3,  and  also  the 


24  OLIVER  AND  OTHERS  v.  PIATT, 

north-west  and  south-west  quarters  of  section  3,  township  3,  he 
received  an  assignment  from  the  University  of  their  right  to  tracts 
1  and  2,  for  which  patents  were  issued  in  the  name  of  Oliver. 

"After  the  exchange  was  effected,  Baum,  and  the  defendant 
Williams,  each  purchased  an  interest  of  one-third  in  tracts  1  and 
2,  86  and  87.  After  Baum's  death,  in  1832,  Oliver  purchased 
his  interest  from  his  heirs.  And  the  1st  December,  1832,  Oliver 
conveyed  to  Williams  an  undivided  half  of  the  ten  acres  re- 
served in  number  3.  On  the  23d  May,  1834,  he  conveyed  to 
him  an  undivided  half  of  tracts  86  and  87,  except  sixty  acres 
which  had  been  sold  to  Prentiss  and  Tromley;  and  on  the  — 
day  of  November,  he  conveyed  to  him  l  one  undivided  half  of 
lots  1  and  2,  on  which  Port  Lawrence  was  laid  out,'  together 
'with  a  like  interest  in  all  sales  and  improvements  thereunto 
belonging.' 

"  Oliver,  Baum,  and  Williams,  agreed  to  lay  out  the  town 
of  Toledo  on  the  site  of  Port  Lawrence,  and  to  make  titles  to 
the  Port  Lawrence  purchasers  of  lots,  on  their  complying  with 
their  contracts. 

"Some  years  after  this,  Oliver  purchased  from  the  Michigan 
University  the  tracts  of  land  he  conveyed  to  it  in  exchange  for 
tracts  1  and  2. 

"  Of  the  Piatt  Company,  John  H.  Piatt  is  deceased,  and  his 
administrators  and  heirs  are  made  parties  to  this  suit.  William 
M.  Worthington  assigned  one-half  his  interest  in  the  Port  Law- 
rence Company,  and  it  is  claimed  and  represented  by  John  E. 
Worthington.  The  interest  of  Worth  has  been  assigned  to  the 
defendant  Ewing,  who  also  claims  the  entire  interest  of  Baum, 
Mack,  Barr,  Burnet,  and  half  the  interest  of  the  complainant. 

"  Of  the  Baum  Company,  Martin  Baum,  Jesse  Hunt,  Wil- 
liam C.  Schenck,  and  William  Barr,  are  deceased." 

Such  is  a  general  outline  of  the  leading  facts.  There  are 
others  which  may  be  required  to  be  adverted  to  in  the  progress 
of  this  opinion ;  but  there  are  many  details  which  must  neces- 
sarily be  passed  over  in  silence,  as  they  would  tend  to  embarrass 
the  discussion  of  the  main  questions  in  the  cause,  and  obscure 
rather  than  illustrate  the  merits  thereof. 

The  object  of  the  bill  is  to  subject  the  tracts  No.  1  and  No. 
2,  now  constituting  the  site  of  the  town  of  Toledo,  formerly 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        25 

known  as  Port  Lawrence,  to  the  rights  of  the  Port  Lawrence 
Company,  composed,  as  we  have  seen,  of  the  Piatt  Company 
and  the  Baum  Company,  and  those  who  claim  under  them,  now 
in  the  possession  of  Oliver  and  Williams,  under  a  title  derived 
from  the  grant  of  the  Michigan  University,  upon  the  ground 
that  a  trust  has  attached  to  those  tracts  in  favor  of  the  Piatt 
and  Port  Lawrence  Companies,  under  the  circumstances  which 
will  be  presently  stated.  These  circumstances  are,  that  the 
lands  given  in  exchange  to  the  Michigan  University,  for  tracts 
No.  1  and  No.  2,  under  the  negotiation  with  the  University, 
were,  at  the  time,  the  property  of  the  Piatt  and  Port  Lawrence 
Companies,  as  cestui  que  trust  thereof;  that  the  facts  were  at 
the  time  well  known  to  Baum  and  Oliver  and  Williams,  and 
consequently  that  the  trust  by  operation  of  law  attached  thereto 
in  the  hands  of  those  parties.  To  this  conclusion  several  ob- 
jections have  been  taken  by  the  counsel  for  the  appellants.  In 
the  first  place,  that  no  such  trust  attached  to  the  lands  so  given 
in  exchange  to  the  Michigan  University,  at  the  time  of  the 
transfer,  and  consequently  none  to  tracts  Nos.  1  and  2,  taken 
in  the  exchange.  In  the  second  place,  that  if  it  did,  as  Oliver 
afterward  repurchased  the  exchanged  lands  from  the  University, 
and  Oliver  and  Williams  under  him  now  hold  some  parts  thereof, 
the  trust  is  revived,  and  has  reattached  to  these  lands,  and  thus 
has  displaced  any  supposed  trust  upon  tracts  Nos.  1  and  2,  at 
least  pro  tanto.  In  the  next  place,  that  Oliver  and  Williams 
are  purchasers  without  notice  of  the  trust,  or  of  any  misappli- 
cation of  the  trust  property  by  the  trustee. 

Before  proceeding  to  the  considerations  applicable  to  the 
first  and  third  points,  it  may  be  well  to  dispose  of  that  which 
grows  out  of  the  second  point,  as  it  involves  a  most  important 
principle  in  equity  jurisprudence.  It  is  a  clearly  established 
principle  in  that  jurisprudence,  that  whenever  the  trustee  has 
been  guilty  of  a  breach  of  the  trust,  and  has  transferred  the 
property,  by  sale  or  otherwise,  to  any  third  person,  the  cestui 
que  trust  has  a  full  right  to  follow  such  property  into  the  hands 
of  such  third  person,  unless  he  stands  in  the  predicament  of  a 
bonaflde  purchaser,  for  a  valuable  consideration,  without  notice. 
And  if  the  trustee  has  invested  the  trust  property,  or  its  pro- 
ceeds, in  any  other  property  into  which  it  can  be  distinctly 


26  OLIVER  AND  OTHERS  V.  PIATT, 

traced,  the  cestui  que  trust  has  his  election  either  to  follow  the 
same  into  the  new  investment,  or  to  hold  the  trustee  personally  lia- 
ble for  the  breach  of  the  trust.  This  right  or  option  of  the  cestui 
que  trust  is  one  which  positively  and  exclusively  belongs  to  him, 
and  it  is  not  in  the  power  of  the  trustee  to  deprive  him  of  it  by 
any  subsequent  repurchase  of  the  trust  property,  although  in  the 
latter  case  the  cestui  que  trust  may,  if  he  pleases,  avail  himself 
of  his  own  right,  and  take  back  and  hold  the  trust  property 
upon  the  original  trust ;  but  he  is  not  compellable  so  to  do.  The 
reason  is,  that  this  would  enable  the  trustee  to  avail  himself 
of  his  own  wrong ;  and  if  he  had  made  a  profitable  investment 
of  the  trust  fund,  to  appropriate  the  profit  to  his  own  benefit, 
and  by  a  repurchase  of  the  trust  fund  to  charge  the  loss  or  de- 
terioration in  value,  if  any  such  there  had  been,  in  the  mean 
time,  to  the  account  of  the  cestui  que  trust — whereas  the  rule  in 
equity  is,  that  all  the  gain  made  by  the  trustee,  by  a  wrongful 
appropriation  of  the  trust  fund,  shall  go  to  the  cestui  que  trust, 
and  all  the  losses  shall  be  borne  by  the  trustee  himself.  The 
option,  in  such  case,  to  take  the  new  or  the  original  fund  is, 
therefore  (as  has  already  been  suggested),  exclusively  given  to 
the  cestui  que  trust,  and  is  given  to  him  for  the  wisest  purposes 
and  upon  the  soundest  public  policy.  It  is  to  aid  in  the  main- 
tenance of  right  and  in  the  suppression  of  meditated  wrong. 
Many  cases  on  this  subject  will  be  found  collected  in  the  ele- 
mentary writers.  See  2  Sugden  on  Vendors,  ch.  14,  sec.  3,  p.  148, 
etc.,  9th  edit.;  2  Story  Eq.  Jurisp.,  sec.  1258  to  sec.  12G5,  3d 
edit.;  Com.  Dig.,  Chancery,  4  W.  25,  to  4  W.  28 ;  and  the  rule 
will  be  found  fully  discussed  and  recognized  in  Hi/all  v-  Eyall, 
1  Atk.  59 ;  Lane  v.  Dighton,  Ambler,  409  ;  Lench  v.  Lench,  10 
Vesey,  511;  and  Docker  v.  Somes,  2  Mylne  &  Keen,  G55  ;  in 
many  of  its  important  bearings.  Lord  ELLENBOROUGII,  in  the 
case  of  Taylor  v.  Plumcr,  3  Maule  &  Selw.  562,  examined  and 
confirmed  the  doctrine  in  its  application  to  cases  at  law,  and 
cited  and  approved  the  decisions  in  equity ;  so  that  it  is  plain 
upon  authority,  and  the  same  would  be  equally  true  upon  prin- 
ciple, that  if  the  tracts  Nos.  1  and  2  were  purchased  with  the 
trust  fund  belonging  to  the  Piatt  and  Port  Lawrence  Companies, 
the  latter  are  at  full  liberty  to  follow  the  same  into  the  hands 
of  any  persons  not  being  bona  fide  purchasers  for  a  valuable 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        27 

consideration  without  notice,  and  the  circumstance  that  there 
has  since  been  a  repurchase  of  the  original  trust  property  by- 
Oliver,  does  not  in  any  manner  affect,  or  control,  or  vary,  the 
right  or  option  of  the  cestui  que  trust.  The  case  is  not  like  that 
put  at  the  bar,  where  a  part  of  the  funds  of  the  cestui  que  trust 
have  been  mixed  up  with  other  funds  exclusively  belonging  to 
the  trustee  in  the  new  purchase  or  investment.  In  such  a  case 
there  may  be  ground  to  hold  the  trust  funds  in  charge  pro  tanto 
therein.  Here,  the  whole  consideration  of  the  purchase  was  a 
fund  wholly  and  exclusively  belonging  to  the  cestui  que  trust,  if 
they  have  made  out  any  title  at  all,  which  we  shall  hereafter 
consider. 

Let  us  then  proceed  to  the  consideration  of  the  other  ques- 
tions above  stated.  And  the  first  is,  whether  at  the  time  of  the 
exchange  with  the  Michigan  University,  the  lands  given  in  ex- 
change for  tracts  Nos.  1  and  2,  were,  in  the  hands  of  the  party 
or  parties  making  that  exchange,  affected  with  any  trust  such  as 
has  been  already  suggested  ?  And  this  leads  us  to  the  consider- 
ation of  the  antecedent  state  of  facts  between  the  parties  to 
this  record. 

We  have  seen  that  the  original  purchase  of  tracts  Nos.  1,  2, 
3,  and  4,  and  Nos.  86  and  87,  was  made  for  the  account  and 
benefit  of  the  Port  Lawrence  Company  ;  and  the  object  of  the 
purchase  was  to  lay  out  a  town  thereon,  and  to  sell  the  lots  to 
purchasers.  Baum  was  appointed  a  trustee  and  agent  for  this 
purpose,  and  he  was  to  make  sale  of  the  lots  and  conduct  the 
other  affairs  of  the  agency.  With  the  consent  of  the  company, 
in  August,  1817,  he  employed  Oliver  as  a  sub-agent,  who  re- 
ceived instructions  from  the  company  in  relation  to  the  plan  of 
the  town  (which  he  was  to  lay  out  in  conjunction  with  William 
C.  Schenck)  and  the  sale  of  the  lots.  This  agency  of  Oliver, 
under  Baum,  was  originally  (as  it  should  seem)  limited  to  one 
year,  but  it  was  certainly  continued,  if  not  for  all,  at  least  for 
some  purposes,  to  a  much  later  period.  In  August,  1818,  Oliver 
sold  one-half  of  his  interest  in  the  Port  Lawrence  Company  to 
Steele  and  Lytle,  and  in  March,  1819,  he  sold  the  residue  to 
the  defendant  Williams,  and  his  partner  Embre.  And  these 
facts  are  most  important  to  be  borne  in  mind,  since  they  clearly 
establish  that  Oliver,  as  an  original  proprietor,  and  Williams,  as 


28  OLIVER  AND  OTHERS  v.  PIATT, 

a  derivative  proprietor,  under  Oliver,  in  the  Port  Lawrence 
Company,  had  full  and  complete  notice  of  the  nature  and  objects 
of  the  original  purchase  by  that  company,  and  of  the  trust  and 
agency  of  Baum  in  accomplishing  those  objects.  In  truth,  the 
laying  out  of  a  town  on  those  tracts,  and  the  sale  of  the  lots, 
seems  to  have  been  an  enterprise  always  cherished  by  some  of 
the  company  with  uncommon  solicitude  and  sanguine  expecta- 
tions of  profit. 

In  consequence  of  the  reduction  of  the  price  of  the  public 
lands  by  Congress,  and  the  pressure  of  the  times,  the  Port  Law- 
rence Company  found  themselves  compelled,  in  1821,  to  relin- 
quish a  part  of  their  tracts  to  the  Government.  For  this  pur- 
pose they  assigned  all  the  four  tracts  to  Baum,  in  September, 
1821  ;  and  the  Piatt  Company  at  the  same  time  assigned  to 
Baum  their  five  quarter-sections ;  and  he,  through  the  defendant 
Williams,  thereupon  relinquished  tracts  Nos.  1  and  2,  to  the 
United  States,  and  the  return  purchase-money  was  applied  pro 
tanto  to  complete  the  payments  due  on  the  other  tracts  (Nos.  3 
and  4,  and  Nos.  86  and  87),  and  the  residue  was  applied  partly 
to  pay  the  balance  due  on  the  five  quarter-sections,  purchased 
by  the  Piatt  Company,  and  partly  to  pay  a  balance  due  on  other 
lands  purchased  by  the  Baum  Company. 

Pausing  here,  for  a  moment,  it  is  apparent  that  the  original 
trust  created  in  tracts  N"os.  1  and  2,  under  the  agency  and  assign- 
ment to  Baum,  for  the  benefit  of  the  Port  Lawrence  Company, 
was,  by  this  relinquishment  to  the  Government,  entirely  dis- 
placed and  extinguished.  These  tracts  afterward,  in  the  Sum- 
mer of  1828,  under  the  act  of  20th  of  May,  1826,  were  selected 
by  the  Secretary  of  the  Treasury  for  the  Michigan  University, 
and  certainly  came  into  the  possession  of  the  latter  discharged 
of  the  trust.  Still,  however,  it  is  obvious  from  the  papers  in 
the  cause,  that  in  the  intermediate  time  between  the  relinquish- 
ment of  these  tracts  and  the  grant  thereof  to  the  University, 
the  original  plan  of  establishing  a  town  on  the  site,  remained  a 
favorite  project  of  Baum  as  agent  of  the  Port  Lawrence  Com- 
pany, and  he  made  strenuous  efforts,  by  applications  to  Congress 
and  to  the  General  Land-office,  to  reacquire  the  title  thereof, 
not  for  himself  alone,  but,  as  his  applications  and  letters  show, 
on  behalf  of  himself  and  his  associates.  He  constantly  held 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        29 

himself  out  as  acting  for  the  benefit  of  the  concern ;  and  there  is 
every  reason  to  suppose,  that  some,  if  not  all,  of  his  associates  were 
lulled  into  security,  and  contemplated,  if  he  should  be  successful, 
to  resume  the  original  plan.  This  may  serve  in  some  measure  to 
explain  their  inactivity,  and  to  show  that  they  continued  to  place 
unlimited  confidence  in  Baum,  that  all  his  proceedings  would  be 
for  their  benefit,  and  not  for  his  own  sole  advantage.  Baum 
petitioned  Congress  on  the  subject  as  early  as  January,  1822, 
and  in  his  letter  to  Mr.  Brown  (a  senator  in  Congress),  of  the 
25th  of  December,  1822,  inclosing  a  duplicate  of  his  petition, 
he  says :  "  Inclosed  is  the  petition  signed  by  myself  only,  still 
others  have  an  interest  in  it ;"  and  he  names  in  the  letter,  and 
its  postscript,  Williams,  Piatt,  and  others.  In  another  letter  to 
the  same  senator,  dated  the  6th  of  February,  1823,  he  says: 
11  The  tracts  purchased  by  myself  and  associates  in  that  quarter, 
those  retained  and  relinquished,  can  be  ascertained  in  the  land- 
office."  In  another  letter  addressed  to  the  Commissioner  of  the 
General  Land-office,  as  late  as  the  27th  of  July,  1827,  he  says: 
"In  consequence  of  the  President's  proclamation,  announcing 
the  sales  of  lands,  I  attended,  at  Delaware,  on  the  9th  instant, 
but  was  much  disappointed  to  find  there  instructions  of  the  Gen- 
eral Land-office,  to  withhold  from  sale  all  lands  situate  north  of 
the  line  which  divided  the  state  of  Ohio  and  the  Michigan  ter- 
ritory, for  I  went  there  for  the  express  purpose  of  repurchasing 
tracts  Nos.  1  and  2,  in  the  Maumee  reservation,  which  I  for- 
merly owned  and  which  I  have  relinquished."  He  adds : 
"  These  lands,  though  bought  in  sundry  persons'  names,  were 
afterward  transferred  to  me  as  agent,  for  the  purpose  of  manag- 
ing and  conveying  them  in  case  of  sales."  In  the  same  letter 
he  protests  against  the  trustees  of  the  Michigan  University  hav- 
ing a  grant  of  these  tracts,  as  they  have  no  claim  to  the  same, 
and  that  he  has  a  strong  claim  upon  the  Government. 

To  repel  the  inferences  deducible  from  these  facts,  it  is  said 
that  the  testimony  of  Carneal  establishes  that  Piatt  attended  that 
very  sale  at  Delaware  for  the  purpose  of  buying  these  tracts, 
not  for  the  Port  Lawrence  Company,  but  for  another  company 
consisting  of  Colston,  Carneal,  and  himself;  and  that  Baum  also 
attended  on  his  own  account,  and  not  for  the  Port  Lawrence 
Company.  Of  transactions  of  this,  nature,  after  such  a  lapse  of 


30  OLIVER  AND  OTHERS  ».  PIATT, 

time,  it  is  perhaps  not  easy  to  ascertain  all  the  facts  which  then 
regulated  the  conduct  of  the  parties,  when  they  depend  upon 
the  frail  recollections  of  witnesses.  It  is  quite  possible  that  the 
circumstances  might  have  been  explained,  and  nothing  have 
been  intended  by  either  party  really  injurious  to  the  interests 
of  the  Port  Lawrence  Company.  But  as  no  sale  took  place  of 
these  tracts  upon  that  occasion,  the  only  effect  which  can  be 
properly  attributed  to  the  testimony,  admitting  it  in  its  fullest 
latitude,  is,  that  it  weakens  our  confidence  in  Piatt's  own  con- 
duct, and  diminishes  the  force  of  the  inference  as  to  Baum's 
then  acting  as  an  agent  for  the  Port  Lawrence  Company.  But 
the  written  statements  of  Baum  in  the  letters  above  cited  are 
evidence  of  his  intentions  and  acts,  of  a  far  higher  character, 
which  the  lapse  of  time  has  not  obscured  or  varied,  and  those 
letters  are,  as  to  himself,  most  conclusive  to  show  that  he  did 
not  deem  himself  as  acting  for  his  own  interest  alone,  but  for 
that  of  his  associates  also,  in  his  whole  proceedings  to  reacquire 
those  tracts. 

As  soon  as  the  Michigan  University  had  obtained  a  title  to 
tracts  Nos.  1  and  2  (in  the  Summer  of  1828),  Oliver,  avowedly 
on  behalf  of  Baum,  made  an  application  to  the  trustees  of  that 
University  for  an  exchange  of  those  tracts  for  other  tracts  in 
the  vicinity.  These  negotiations  were  begun  as  early  as  the 
12th  of  August,  1828,  and  various  propositions  were  made  and 
negotiations  were  had  by  the  trustees  and  Oliver,  as  agent  of 
Baum,  between  that  time  and  the  4th  of  January,  1831,  when, 
the  consent  of  Congress  having  been  obtained  for  the  exchange, 
by  an  act  approved  on  the  13th  of  January,  1830,  the  Uni- 
versity agreed  to  make  the  exchange ;  and  accordingly,  by  their 
deed,  dated  the  7th  day  of  February,  1830,  did  convey  their 
right  and  title  to  tracts  Nos.  1  and  2  to  Oliver  in  fee-simple,  in 
consideration  of  receiving  a  deed  from  Oliver  of  certain  tracts, 
containing  seven  hundred  and  sixty-seven  and  a  half  acres,  viz.: 
the  whole  of  tracts  Nos.  3  and  4,  the  south-west  quarter  of  section 
2,  and  the  west  half  of  section  3  ;  the  tracts  being  part  of  the  pur- 
chase of  the  Port  Lawrence  Company,  and  the  quarter  and  half- 
sections  being  part  of  the  purchase  of  the  Piatt  Company,  in 
817.  We  thus  trace  the  trust  property  home  to  the  Michigan 
University,  as  obtained  by  a  conveyance  from  and  under  Baum 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        31 

and  Oliver  in  pursuance  of  a  negotiation,  avowedly  made  by 
Oliver  on  behalf  and  as  agent  of  Baum,  as  the  sole  considera- 
tion of  the  grant  of  Nos.  1  and  2  to  Oliver  by  the  University. 

And  this  conducts  us  to  the  consideration  of  that  which  is 
the  main  hinge  on  which  the  present  case  turns ;  that  is, 
whether  the  tracts  so  conveyed  by  Oliver  to  the  University 
were  at  the  time  affected  with  the  trust  in  favor  of  the  Piatt 
and  Port  Lawrence  Companies,  with  which  they  were  originally 
chargeable  in  the  hands  of  Baum.  This  necessarily  involves  a  re- 
view of  the  title  of  Oliver  to  the  tracts  (the  three  quarter-sections) 
belonging  to  the  Piatt  Company  under  the  attachment  proceed- 
ings in  Michigan,  and  also  of  his  title  under  the  mortgage  of 
tracts  Nos.  3  and  4,  and  Nos.  86  and  87,  belonging  to  the  Port 
Lawrence  Company,  and  the  foreclosure  thereof, — in  connection 
with  the  subsequent  acts  of  Baum  and  Oliver  in  the  premises. 
Unless  the  title  thus  derived  is  beyond, all  legal  exception  (omni 
exceptions  major)  as  an  adverse  and  unimpeachable  title,  it  is 
plain,  that  the  original  trust  attached  at  the  time  of  the  exchange 
to  the  tracts  so  conveyed,  and  consequently  (as  has  been  already 
suggested)  it  was,  at  the  option  of  the  cestui  que  trust,  trans- 
ferable and  transferred  to  tracts  Nos.  1  and  2.  For  it  is,  in  our 
judgment,  beyond  all  question,  that  Oliver  at  the  time  of  the 
exchange  had  full  notice  of  the  trust  and  title  originally  in- 
vested in  Baum,  and  that  his  acts  in  making  the  exchange  are 
to  be  deemed  the  acts  of  Baum,  and  affected  by  the  same  con- 
siderations as  if  personally  transacted  by  Baum  himself,  and 
were  designed  by  mutual  consent  to  promote  the  contemplated 
objects  and  interests  of  both. 

And,  first,  let  us  review  the  proceedings  under  the  attach- 
ment. In  September,  1822,  Baum  gave  a  certificate  to  Oliver, 
stating  that  a  debt  of  $213.02  was  due  to  him  from  the  Port 
Lawrence  Company  for  money  refunded  to  purchasers  of  lots  at 
the  request  of  the  company,  "  it  being  the  amount  diie  on  the 
shares  originally  owned  by  John  H.  Piatt,  Robert  Piatt,  Gr.  A. 
Worth,  and  William  M.  Worthington."  These  persons  consti- 
tuted the  Piatt  Company ;  and  consequently  the  claim  thus 
asserted  was  a  subdivision  of  a  debt  confessedly  due  from  the 
Port  Lawrence  Company,  in  which  the  Piatt  Company  had  a 
moiety  of  the  interest  only.  Whether  Baum  had,  in  virtue  of 


32  OLIVER  AND  OTHERS  v.  PIATT, 

his  general  agency,  the  right   to  give  such  a  certificate,  thus 
severing  a  joint  debt,  so  as  to  be  binding  upon  the  Piatt  Com- 
pany alone,  without  their  consent,  and  whether  this  certificate 
was  bona  fide  given  under  justifiable  circumstances,  it  is  unnec- 
essary to  consider,  although  the  transaction  is  certainly  open  to 
some  observation  in  point  of  authority  as  well  as  propriety  in  the 
then    unliquidated    concerns  of  the   Port  Lawrence   Company. 
Assuming,  however,  the  transaction  to  have  been  perfectly  cor- 
rect and  binding  in  all  respects,  let  us  examine  the  subsequent 
proceedings  consequent  thereon.      Upon  this  certificate  Oliver, 
in   October,   1823,   instituted  a  suit  by  attachment  in  Monroe 
County,  in  the  territory  of  Michigan,  against  Baum,  Robert  Piatt, 
G.  A.  Worth,  and  William  Worthington  (John  H.  Piatt  being 
then  deceased),  alleging  them  to  be  joint  partners  and  survivors, 
and  all  residing  out  of  the  territory — upon  which  four  of  the 
quarter-sections  of  land  owned  by  the  Piatt  Company  in  that 
county  were  attached.     At  the  October  term,  1826,  of  the  same 
court,  judgment  was  obtained  by -default  against  all  the  defend- 
ants, no  appearance  having  been  entered  for  them  ;  and  upon  the 
execution  issuing  thereon,  three  of  the  four  sections  (those  which 
were  afterward  conveyed  to  the  Michigan  University)  were  sold, 
and  bid  off  by  an  agent  of  Oliver,  and  were  afterward  conveyed 
by  him  to  Oliver.     Of  this  suit  there  is  no  pretense  to  say  that 
any  of  the  defendants,  except  Baum,  had  any  notice,  if  indeed 
he  had  any,  although  some  of  them  resided  in  the  same  state 
where  Oliver  resided,  and  one  of  them  in  a  neighboring  state, 
at  no  great  distance,  who   was  known  to  be  a  man  of  large 
property.     The  other  members  of  the  Port  Lawrence  Company 
were  not  made  parties  to  the  suit.     It  was  brought  in  a  distant 
territory,  almost  then  a  wilderness,  more  than  two  hundred  miles 
from  the  residence  of  the  defendants;  and  if  it  had  been  the 
design   of  Oliver  to  procure  a  judgment   against   the   parties, 
without  any  notice  to  them,  which  should  be  obligatory  upon 
them,  and  to  give  Oliver  a  good  title  to  the  lands  at  a  compara- 
tively   trivial   price,    better   means  could   scarcely  have   been 
devised  to  accomplish  the   purpose.      For  the   institution  and 
consummation   of  this  suit  behind  the  backs  and  without  the 
knowledge  of  the  parties  in  interest,  no  better  excuse  can  now 
be  found   than  that  Oliver  did  not  choose  to  institute  a  suit 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.    33 

against  them  at  home,  as  it  might  give  them  offense  and  break 
up  some  former  ties  of  acquaintance.  How  far  such  an  excuse 
is  admissible,  we  do  not  stop  to  inquire.  It  rather  tends  to  cast 
a  shade  upon  the  transaction  than  to  vindicate  it.  But  what  was 
the  title  thus  acquired,  supposing  all  the  proceedings  to  be  bona 
fide  f  It  was  a  mere  naked  title  in  equity  to  the  tracts,  the 
title  to  which  still  remained  in  the  United  States ;  and  the  legal 
title  could  not  be  consummated,  unless  the  certificates  of  the 
purchase  and  payments  for  the  tracts  were  first  surrendered  to 
the  United  States;  Those  certificates  were  then  in  the  hands  of 
Baum,  as  trustee  of  the  Piatt  Company;  and  he  had  no  right 
under  the  circumstances  to  assign  or  surrender  those  certificates 
to  Oliver  to  enable  him  to  make  his  title  available  at  law,  with- 
out the  express  consent  of  the  Piatt  Company.  If  he  had  re- 
fused, Oliver  could  not  have  obtained  them,  unless  upon  a  bill 
in  equity  to  which  all  the  proprietors  should  be  made  parties, 
and  in  which  they  would  have  been  at  full  liberty  to  examine 
into  the  validity  and  merits  of  the  original  claim  of  Oliver,  on 
which  his  attachment  was  founded,  and  also  into  the  regularity 
and  bona  fides  of  the  transactions  in  and  under  the  suit.  Yet 
Baum,  in  December,  1828,  assigned  and  surrendered  up  these 
certificates  to  Oliver,  and  thus  enabled  him  to  consummate  his 
title  and  reduce  it  to  a  legal  title,  by  obtaining  a  patent,  without 
any  such  consent ;  and  in  so  doing  he  was  guilty  of  a  manifest 
breach  of  trust,  of  which  Oliver  can  not  now  be  permitted  to 
pretend  ignorance.  It  is  also  a  fact  of  no  small  significance, 
that  the  surrender  of  these  certificates  was  contemporaneous 
with  the  surrender  to  Oliver  of  the  certificates  of  tracts  Nos.  3 
and  4;  and  subsequently,  in  December,  1829,  a  like  surrender 
of  Xos.  86  and  87,  belonging  to  the  Port  Lawrence  Company, 
under  the  foreclosure  of  the  mortgage,  which  we  shall  have  oc- 
casion to  review;  and  that  all  this  was  done  pending  the  nego- 
tiations with  the  Michigan  University  by  Oliver  on  behalf  of 
Baum  for  the  exchange. 

This  view  of  the  matter  releases  us  from  no  small  doubt  and 
difficulty  in  relation  to  an  argument  pressed  at  the  bar  with 
great  earnestness ;  and  that  is,  whether  such  an  equity  was  at- 
tachable and  vendible  under  the  attachment  law  of  Michigan. 
There  is  great  difficulty  in  maintaining  the  affirmative,  for  the 

3 


34  OLIVER  AND  OTHERS  v.  PIATT, 

reasons  stated  in  the  opinion  of  the  learned  judge  in  the  court 
below;  and  especially  if,  as  has  been  suggested,  the  act  is  but 
a  transcript  of  an  act  of  New  Jersey,  and  the  courts  of  that 
State  have,  as  has  been  asserted  at  the  bar,  held  no  such  equity 
attachable. 

Then,  as  to  the  mortgage  and  the  proceedings  under  it.  The 
mortgage  was  given  upon  tracts  Nos.  3  and  4,  and  Nos.  86  and 
87,  by  Baura  to  Oliver,  in  August,  1823,  upon  an  account  then 
adjusted  between  him  and  Oliver  against  the  Port  Lawrence 
Company  (and  which  does  not  appear  ever  to  have  been  ex- 
amined or  sanctioned  by  the  company  itself)  for  a  balance  of 
$1,835.47,  then  supposed  to  be  due  to  him  for  money  paid  and 
services  rendered  by  him  as  agent  of  the  company.  In  October, 
1825,  a  bill  was  filed  in  the  Supreme  Court  of  Michigan  (within 
which  these  tracts  were  situate)  to  foreclose  the  mortgage ;  and 
such  proceedings  were  had  upon  this  suit,  that,  in  September, 
1828,  the  tracts  were  sold,  and  at  the  sale  bought  by  Oliver  for 
the  sum  of  S618.56,  and  a  deed  of  conveyance  thereof  was  ac- 
cordingly made  to  him.  To  this  suit  Baum  alone  was  made  a 
party ;  none  of  the  other  proprietors  of  the  Port  Lawrence  Com- 
pany being  made  parties,  although  Oliver  knew  perfectly  well 
who  they  were,  and  that  Baum  was  merely  their  trustee,  and 
that  they  were  the  cestui  que  trust,  possessing  the  beneficial  inter- 
est in  the  premises.  Under  such  circumstances,  to  allow  the 
foreclosure  to  stand,  so  as  to  conclude  the  rights  of  the  cestui  que 
trust,  would  be  a  violation  of  all  the  doctrines  of  courts  of  equity 
upon  this  subject.  The  decree  must  be  treated,  as  to  them,  as 
wholly  inoperative  and  void. 

But  there  is  another  view  of  the  matter,  which  is  conclusive. 
The  mortgage  was  of  a  mere  equity,  the  legal  title  being  still 
outstanding  in  the  United  States ;  and  supposing  that  this  equity 
could  have  been  foreclosed  in  such  a  suit  (which,  considering  the 
defect  of  the  real  parties  in  interest,  it  clearly  could  not),  still  it 
was  a  naked  equity,  which  could  be  made  available  to  obtain  a 

!  title  from  the  United  States,  only  by  an  assignment  and  sur- 
render of  the  certificates  of  the  purchase  and  payments,  then  held 
by  Baum  for  the  benefit  and  use  of  the  Port  Lawrence  Company. 
And  here,  again,  the  same  considerations  apply,  which  have 
been  already  suggested.  Oliver  could  not  obtain  an  assignment 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        35 

and  surrender  of  those  certificates,  except  by  a  bill  in  equity 
against  Baum,  to  which  the  other  proprietors  in  the  Port  Law- 
rence Company  must  have  been  made  parties,  as  they  were 
necessary  parties ;  and  thus  the  whole  merit  of  the  mortgage 
and  foreclosure  must  have  been  brought  directly  before  the 
court  for  adjudication.  Yet  Baum,  without  any  consultation 
with  or  assent  of  those  proprietors,  assigned  and  surrendered  the 
certificates  of  those  tracts  also  to  Oliver,  and  thus  enabled  him 
to  obtain  a  patent  therefor  from  the  United  States,  in  subversion 
of  their  rights  and  his  duty.  This  was  a  gross  breach  of  trust, 
and  was  done  (let  it  be  repeated)  in  December,  1828  and  1829, 
pending  the  negotiations  with  the  Michigan  University,  obviously 
for  the  purpose  'of  enabling  Oliver  in  his  (Baum's)  name,  and  on 
his  behalf,  to  consummate  the  exchange.  And,  finally,  when 
the  negotiation  was  consummated  by  means  of  these  very  certifi- 
cates, Oliver,  with  the  consent  of  Baum,  was  enabled  to  obtain 
a  patent  therefor,  on  the  4th  of  March,  1831. 

Very  soon  after  the  patent  was  so  obtained,  viz.,  on  the  16th 
of  May,  1831,  we  find  that  Baum,  Oliver,  and  Williams  en- 
tered into  a  written  agreement,  by  which  Oliver  purported  to 
sell,  in  fee-simple,  to  Baum  and  Williams,  each  one-third  part 
of  the  tracts  Nos.  1  and  2,  and  Nos.  86  and  87,  with  the  excep- 
tion of  sixty  acres  out  of  No.  86 ;  and  they  were  to  receive  a 
quit-claim  deed  therefor  from  him  accordingly,  for  the  sum  of 
$1,555  for  each  third  part.  The  parties  farther  agreed  to  lay 
out  a  town  upon  the  old  site,  with  some  change  of  the  plan,  and 
to  bring  the  lots  into  the  market  for  sale;  and  they  were  to 
contribute  to  the  charges  and  expenses  according  to  their  re- 
spective interests.  After  the  death  of  Baum,  Oliver  purchased 
his  share  of  the  tracts  from  his  heirs ;  and  by  certain  deeds  of 
quit-claim,  executed  in  December,  1832,  in  May,  1834,  and  in 
November,  1834,  Oliver  conveyed  one-half  of  the  premises  to 
Williams. 

Now,  looking  at  these  transactions  together,  it  seems  almost 
impossible  to  escape  from  the  conclusion,  that  Baum  and  Oliver 
had  a  mutual  interest  in  the  negotiation  with  the  Michigan  Uni- 
versity ;  that  it  was  not  only  carried  on  in  the  name  of  Baum, 
and  apparently  for  his  account,  but  that  Oliver  acted  as  his 
agent  throughout ;  that  the  deed  from  the  University  was  made 


36  OLIVER  AND  OTHERS  v.  PIATT, 

directly  to  Oliver,  with  the  consent  of  Baum ;  that  the  assign- 
ment and  surrender  of  all  the  certificates  by  Baum,  to  Oliver, 
was  for  the  express  purpose  of  enabling  Oliver  to  complete  the 
bargain  with  the  University ;  and  that  the  agreement  between 
Baum,  Oliver,  and  Williams,  which  followed  almost  immediately 
upon  the  grant  of  the  patent,  was  made  in  pursuance  of  a  prior 
understanding  between  all  the  parties,  and  was  but  a  consum- 
mation of  the  objects  originally  contemplated  by  Baum  and  Ol- 
iver, from  the  period  of  their  first  negotiation  with  the  Univer- 
sity down  to  the  time  of  the  execution  of  that  agreement.  And 
all  this  was  done  by  Baum  and  Oliver,  without  the  knowledge 
or  consent  or  approbation  of  the  Piatt  and  Port  Lawrence  Com- 
panies, and  was  never  sanctioned  by  them.  Under  such  cir- 
cumstances, what  is  the  true  duty  of  a  court  of  equity  ?  It  is, 
to  hold  the  parties  engaged  in  these  transactions,  with  full  notice 
of  the  title  and  the  trust  in  Baum,  bound  by  that  trust,  and  to 
enforce  that  trust  against  the  tracts  Nos.  1  and  2,  so  far  as  they 
remain  in  their  hands  unaffected  by  the  rights  of  purchasers 
under  them,  bona  fide  for  a  valuable  consideration,  without  no- 
tice. In  our  judgment,  no  reasoning  can  make  the  proposition 
more  clear  than  a  simple  recital  of  the  facts,  and  the  statement 
of  the  general  docrine  of  equity  jurisprudence  that  the  cestuis 
qitc  trust  have  an  option  to  follow  their  property,  or  its  proceeds, 
into  any  other  property  into  which  it  has  been  converted  by  a 
breach  of  the  trust,  subject  only  to  the  rights  of  such  purchasers 
as  have  been  just  referred  to.  Indeed,  the  question,  as  against 
Baum  and  Oliver,  seems  absolutely  closed  by  the  state  of  the 
evidence ;  and  their  intimate  knowledge  of  the  whole  concern 
requires  neither  illustration  nor  commentary. 

Let  us,  then,  proceed  to  the  consideration  of  the  case  as  to 
Williams.  It  is  said  that  he  stands  in  the  predicament  of  a  bona 
fide  purchaser  for  a  valuable  consideration,  without  notice ;  and 
if  he  does,  he  is  certainly  entitled  to  protection.  Williams,  in 
his  answer,  asserts  himself  to  be  such  a  purchaser,  but  it  is  dif- 
ficult to  maintain  that  averment  in  its  just  legal  sense,  looking 
to  all  the  circumstances  of  the  case.  In  1819,  he  became  a  pur- 
chaser of  one-half  of  the  interest  of  Oliver  in  the  Port  Lawrence 
Company,  and,  as  such,  he  could  not  fail  to  know  that  tracts 
Nos.  1  and  2,  3  and  4,  and  Nos.  86  and  87,  belonged  to  that 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        37 

company ;  and  he  has  never  ceased  to  be  a  member  of  that  com- 
pany. In  1821,  he  was  employed  by  Baum,  the  acknowledged 
trustee  and  agent  of  the  company,  to  surrender  tracts  Nos.  1  and 
2  to  the  Government  of  the  United  States ;  and  through  him  the 
relinquishment  took  place.  He  says  that  he  did  not  know  of  the 
negotiation  between  Oliver  and  the  University,  for  an  exchange 
of  the  lands,  until  after  its  consummation,  and  never  heard  of 
the  details  of  said  negotiations,  nor  what  lands  were  given  in 
exchange,  except  parts  of  tracts  Nos.  3  and  4.  Now,  these 
very  tracts  belonged  to  the  Port  Lawrence  Company,  so  that  he 
was  necessarily  put  upon  the  inquiry  by  what  means  Baum  had 
parted  with  them,  and  Oliver  had  become  possessed  of  them. 
Besides,  in  his  negotiation  and  surrender  of  tracts  Nos.  1  and  2 
to  the  Government,  and  the  apportionment  of  the  funds  arising 
from  the  relinquished  lands,  first  to  the  remaining  lands  of  the 
Port  Lawrence  Company,  and  then  to  the  lands  respectively 
purchased  by  the  Piatt  and  Baum  Companies,  he  necessarily 
became  acquainted  with  the  relative  interests  of  all  these  com- 
panies therein.  The  origin  and  title  of  the  Michigan  University 
to  the  tracts  Nos.  1  and'  2,  and  the  exchange  thereof  with  Ol- 
iver, were  matters  of  public  notoriety,  and  proclaimed  in  the 
acts  of  Congress  under  which  the  exchange  was  made.  The 
deed  from  the  University  to  Oliver  recited  the  material  facts 
respecting  the  lands  given  in  exchange,  and  referred  to  the  rec- 
ords of  the  antecedent  negotiations ;  and  the  patent  itself,  from 
the  Government,  of  tracts  Nos.  1  and  2,  referred  to  the  deed  of 
Oliver  to  the  University,  of  the  lands  given  in  exchange ;  so 
that  it  is  most  manifest  that  Williams,  as  a  proprietor  in  the  Port 
Lawrence  Company,  and  as  agent  thereof  in  the  relinquish- 
ment above  referred  to,  and  as  a  purchaser  under  Oliver,  not 
only  had  the  most  ample  means  of  knowing  the  nature  and  char- 
acter and  extent  of  the  title  of  Oliver  to  the  lands  under  consid- 
eration, but  he  was  positively  put  upon  inquiry  in  relation  to  the 
whole  matter.  If,  under  such  circumstances,  he  chose  to  remain 
in  indolent  ignorance  or  indifference  to  the  title,  it  was  a  volun- 
tary ignorance  and  indifference,  which  ought  not  to  be  permitted 
to  avail  him  against  the  rights  of  the  cestuis  que  trust.  If  we 
add  to  this  the  fact  that  within  two  months  after  the  patent  was 
obtained  by  Oliver,  he  and  Baum  united  in  an  agreement  with 


38  OLIVER  AND  OTHERS  v.  PIATT, 

Oliver,  by  which  each  was  to  take  a  third  part  in  the  tracts 
Xos.  1  and  2,  and  Nos.  86  and  87  (these  tracts  never  having 
been  relinquished  by  the  Port  Lawrence  Company  to  the  Gov- 
ernment), to  be  laid  out  as  a  town,  and  the  lots  sold  on  joint 
account,  it  would  seem  almost  incredible  that  he  should  not 
have  made  some  inquiries  on  the  subject.  And  the  only  reason- 
able conclusion  seems  to  be,  that  he  was  in  as  full  possession  of 
all  the  facts  as  were  his  partners  Oliver  and  Baum.  Another 
significant  circumstance  is,  that  this  very  agreement  contained 
a  stipulation  that  Oliver  should  give  a  quit-claim  deed  only  for 
the  tracts ;  and  the  subsequent  deeds  given  by  Oliver  to  him 
accordingly  were  drawn  up  without  any  covenants  of  warranty, 
except  against  persons  claiming  under  Oliver,  or  his  heirs  and 
assigns.  In  legal  effect,  therefore,  they  did  convey  no  more 
than  Oliver's  right,  title,  and  interest,  in  the  property ;  and 
under  such  circumstances,  it  is  difficult  to  conceive  how  he 
can  claim  protection  as  a  lona  fide  purchaser,  for  a  valuable 
consideration,  without  notice,  against  any  title  paramount  to 
that  of  Oliver,  which  attached  itself  as  an  unextinguished  trust 
to  the  tracts. 

And  here,  in  our  judgment,  the  merits  of  the  case  would 
seem  to  be  brought  to  a  close.  But  certain  objections  have  been 
made  to  the  right  of  the  plaintiff  to  maintain  the  bill  upon  other 
collateral  grounds.  In  the  court  below  an  objection  was  taken, 
by  way  of  plea,  that  the  original  agreement  of  the  Piatt  and 
Baum  Companies,  in  regard  to  the  purchases  of  these  tracts  at 
the  public  sale  in  1817,  was  an  illegal  combination  in  fraud  of 
the  rights  of  the  United  States,  and  therefore  it  makes  the  whole 
purchase  an  utter  nullity.  This  objection  was  fully  answered 
in  the  opinion  of  the  Circuit  Court,  in  which,  on  this  point,  we 
fully  concur.  It  has  been  abandoned  by  the  learned  counsel 
here ;  and,  indeed,  in  our  opinion,  properly  abandoned,  as  un- 
maintainable in  point  of  fact  as  well  as  law. 

Another  objection  is  to  the  lapse  of  time  (a).    The  mere  lapse 

(a)  Acquiescence,  which  it  merely  inaction,  is  the  very  thing  which  the  statute 
contemplates  as  creating  the  limitation  which  cuts  off  the  right,  Bower  v.  Earl, 
18  Mich.  378.  This  cane  was  decided  in  1869. 

The  laches  which  will  bar  a  legal  title  will  bar  equity,  even  in  case  tainted 
by  fraud,  Bond  T.  Hopkins,  1  Sch.  &  Lef.  429.  Twenty  years  bars  in  equity  as 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        39 

of  time  constitutes  of  itself  no  bar  to  the  enforcement  of  a  sub- 
sisting trust ;  and  time  begins  to  run  against  a  trust  only  from 
the  time  when  it  is  openly  disavowed  by  the  trustee,  who  insists 
upon  an  adverse  right  and  interest,  which  is  fully  and  unequivo- 
cally made  known  to  the  cestui  que  trust.  Now,  until  1831,  no 

in  law,  Chalmondely  \,  Clinton,  2  Jac.  &  Walk.  139;  Stackhouse  v.  Barnston,  10 
Vesey,  467. 

Gifford  v.  2f.  J.  R.  R.  Co.,  2  Stockton's  Ch.  R.  171.  Twenty  years'  acquiescence 
by  owner  of  stock  in  a  bridge  company  in  a  certain  use  of  the  bridge,  held  to  estop 
him  from  enjoining  such  use.  . 

Birch  v.  Funk,  2  Metcalf,  544.  Held,  that  a  suit  forty-five  years  after  guar- 
dianship, and  twenty-five  years  after  arriving  at  full  age,  by  wards  against  guar- 
dian, is  stale,  and  will  not  be  sustained.  On  another  petition  showing  cover- 
ture until  perhaps  a  few  years'  of  filing  a  second  petition,  and  alhaging  fraud  on 
part  of  guardian  in  concealing  the  fact  that  there  was  property — held  good,  and 
suit  well  brought. 

Twenty-five  years'  lying  by,  held  binding,  Blannerhasset  v.  Day,  2  Ball  &  B. 
128.  Eighteen  years  held  the  same,  Gregory  v.  Gregory,  Coop.  201. 

Wallett  v.  Collins,  10  How.  186,  suit  to  set  aside  conveyances  by  heirs  arriving 
at  age  in  1834.  Case  decided  in  1850,  and  held  that  absence  from  state,  and  dis- 
covery in  1838  of  the  fraud,  sufficient  to  account  for  the  delay.  Plaintiff  was 
young  and  ignorant  of  his  right  when  he  gave  the  deed,  which,  sixteen  years  after 
he  became  of  age,  was  set  aside. 

In  Barwell  v.  Barwell,  34  Beavan,  375,  it  was  held  that  after  twenty  years' 
delay  or  acquiescence,  relief  could  not  be  granted  in  a  case  of  doubtful  trust,  or, 
in  other  words,  where  it  was  doubted  that  any  trust  ever  existed. 

The  sale  of  a  reversionary  interest  in  real  estate  sustained  where  there  was 
a  fair  price  given,  after  TWENTY-TWO  years'  acquiescence,  Lord  v.  Jeffkins,  35 
Beavan,  7. 

The  sale  of  a  reversionary  interest  set  aside  after  over  eighteen  years  of  ac- 
quiescence. A  partial  confirmation  was  made  during  the  intermediate  time,  St. 
Alban  v.ffarding,  27  Beavan,  11. 

In  Williams  v.  Champion,  6  Ohio,  169,  lapse  of  time,  which  is  another  name  for 
acquiescence,  was  set  up  as  the  defense.  By  the  court:  "Lapse  of  time  never  ex- 
tinguishes the  rights  of  the  parties  merely  as  lapse  of  time.  It  does  so  when  a 
time  for  doing  an  act  is  fixed,  and  the  party  to  whom  it  is  to  be  performed  forth- 
with evinces  his  intention  to  put  an  end  to  the  agreement  so  soon  as  the  failure  to 
perform,  at  the  time  fixed,  has  occurred." 

These  authorities  plainly  indicate  that  the  true  rule  of  ACQUIESCENCE  is: 

1.  Merely  as  such,  no  time  short  of  the  period  limited  by  the  statute  of  lim- 
itations, will  bar. 

2.  That  "  equity  follows  the  law,"  and  that  the  subject-matter  of  the  suit  is 
considered  in  fixing  the  proper  rule  as  to  the  time  within  which  suit  should  be 
brought. 

3.  That  when  acquiescence  bars  the  action,  it  ceases  so  to  be,  and  becomes  an 
election  to  allow  the  trustee  to  hold,  or  a  confirmation  of  his  acts,  or  an  estoppel 
intervenes. 

See  further  hereinafter  the  cases  where  suits  in  equity  are  brought  for  the 
recovery  of  real  estate. — EDITOR. 


40  OLIVER  AND  OTHERS  v.  PIATT, 

final  overt  act  was  done  by  Bau/n  in  violation  of  his  duty  as 
trustee ;  and  the  first  and  great  breach  of  that  duty,  on  his  part, 
was  the  surrender  of  the  certificates  of  the  tracts  to  Oliver  at 
different  periods  between  1828  and  1831.  At  what  particular 
period  the  subsequent  acts  of  Baum,  Oliver,  and  Williams  be- 
came first  known  to  the  plaintiff  and  the  other  proprietors  of  the 
Piatt  and  Port  Lawrence  Companies  having  the  same  interest, 
does  not  distinctly  appear ;  but  the  facts  could  not  have  been 
fully  known  or  understood  until  within  a  few  years  before  the 
filing  of  the  bill,  and  at  most  probably  not  exceeding  eight  or 
ten.  That  period,  upon  admitted  principles,  is  far  too  short  to 
interpose  any  positive  bar  to  relief  in  equity.  There  may  have 
been  an  unjustifiable  delay,  and  gross  inattention  on  the  part  of 
some  of  the  proprietors.  But  as  against  persons  perfectly  connu- 
sant  of  the  trust,  it  can  furnish  no  ground  for  any  denial  of  the 
relief  which  the  case  otherwise  requires. 

Another  objection  urged  at  the  argument  is,  that  the  bill  is 
multifarious  in  uniting  the  trust  property  owned  by  the  Piatt 
Company  and  the  Port  Lawrence  Company  in  one  bill,  as  the 
interests  of  each  arc  separate  and  distinct  in  the  tracts  conveyed 
by  Oliver  to  the  Michigan  University.  We  are  of  opinion  that 
the  bill  is  in  no  just  sense  multifarious..  It  is  true  that  it  em- 
braces the  claims  of  both  the  companies ;  but  their  interests  are 
so  mixed  up  in  all  these  transactions,  that  entire  justice  could 
scarcely  be  done,  at  least  not  conveniently  done,  without  a  union 
of  the  proprietors  of  both  companies ;  and  if  they  had  not  been 
joined,  the  bill  would  have  been  open  to  the  opposite  objection 
that  all  the  proper  parties  were  not  before  the  Court,  so  as  to 
enable  it  to  make  a  final  and  conclusive  decree  touching  all  their 
interests,  several  as  well  as  joint.  It  was  well  observed  by  Lord 
COTTENJIAM  in  Campbell  v.  Mackay,  1  Mylne  &  Craig,  603,  and 
the  same  doctrine  was  affirmed  in  this  Court  in  Gaines  and  wife 
v.  Relfand  Chew,  2  How.  619,  642,  that  it  is  impracticable  to 
lay  down  any  rule  as  to  what  constitutes  multifariousness,  as  an 
abstract  proposition ;  that  each  case  must  depend  upon  its  own 
circumstances ;  and  much  must  necessarily  be  left,  where  the 
authorities  leave  it,  to  the  sound  discretion  of  the  court  (a).  But, 
\ _ 

(a)  S*«  also  Story  Eq.  Plead.,  sec.  530  to  sec.  640,  and  the  authorities  there 
cited.  Attorney-General  v.  Cratlock,  3  Mylne  &  Craig,  85. 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        41 

if  the  objection  were  tenable  ^,s  we  are  of  opinion  it  is  not),  it 
would  be  quite  too  late  to  insist  upon  it.  The  objection  of  mul- 
tifariousness  can  not,  as  a  matter  of  right,  be  taken  by  the  par- 
ties, except  by  demurrer,  or  plea  or  answer;  and  if  not  so 
taken,  it  is  deemed  to  be  waived.  It  can  not  be  insisted  upon 
by  the  parties  even  at  the  hearing  in  the  court  below,  although 
it  may  at  any  time  be  taken  by  the  court  sua  sponte,  wherever 
it  is  deemed  by  the  court  to  be  necessary  or  proper  to  assist  it 
in  the  due  administration  of  justice.  And  at  so  late  a  period  as 
the  hearing,  so  reluctant  is  the  court  to  countenance  the  objec- 
tion, that,  if  it  can  get  on  in  the  cause  to  a  final  decree  without 
serious  embarrassment,  it  will  do  so,  disregarding  the  fault  or 
error,  when  it  has  been  acquiesced  in  by  the  parties  up  to  that 
time.  A  fortiori,  an  appellate  court  would  scarcely  entertain  the 
objection,  if  it  was  not  forced  upon  it  by  a  moral  necessity. 
There  is  no  pretense  to  say  that  such  is  the  predicament  of  the 
present  cause  in  this  Court. 

Another  objection  taken  at  the  argument  is,  that  Baum's 
heirs  can  not  insist  upon  any  title  to  the  property  in  question, 
because  they  are  bound  by  the  warranty  of  their  ancestor  in  the 
conveyance  thereof  to  Oliver.  But  this  objection  has  no  foun- 
dation whatsoever  in  law,  whether  the  warranty  be  lineal  or 
collateral ;  for  the  heirs  here  do  not  claim  any  title  to  the  prop- 
erty by  descent,  but  simply  by  purchase ;  and  it  is  only  to  cases 
of  descent  that  the  doctrine  of  warranty  applies.  For  this  it  is 
sufficient  to  cite  Litt.  sec.  735 ;  Co.  Litt.  365 ;  Com.  Dig.  Guar- 
anty, I.  2,  and  Bac.  Abridgment,  Warranty,  Gr,  H,  I,  L.  The 
fact,  therefore,  that  assets  descended  upon  Mary  P.  Ewing,  one 
of  the  children  and  heirs  of  Baum,  can  have  no  influence  upon 
the  right  of  her  husband  or  herself  to  enter  the  land  in  contro- 
versy by  purchase,  however  it  might  repel  their  right  to  take 
it  by  descent. 

Another  objection  suggested  at  the  argument  was  the  diffi- 
culty of  apportioning  the  respective  interests  of  the  cestuis  que 
trust  in  the  tracts  Nos.  1  and  2.  But  this  difficulty  has  been 
overcome ;  and  it  constitutes  no  matter  of  difference  between  the 
Piatt  and  the  Port  Lawrence  Companies,  so  far  as  their  own 
interests  are  concerned,  as  distinguished  from  that  of  Oliver  and 
Williams. 


AND  OTHERS  v.  GIROD  AND  OTHERS, 


As  to  the  report  of  the  master  and  the  exceptions  thereto  in 
the  court  below,  although  those  exceptions  were  not  formally 
overruled  or  allowed,  yet  it  is  plain  that  in  the  final  decree  they 
were  all  disposed  of,  some  being  allowed  and  others  disallowed  ; 
and  no  argument  has  been  addressed  to  us  upon  the  present 
occasion,  which  points  out  any  specific  errors,  which  require 
correction  beyond  those  which  have  been  already  incidentally 
hinted  at. 

We  pass  over  some  other  objections,  which  were  suggested 
at  the  argument,  without-  remark,  as  this  opinion  has  already 
been  protracted  to  an  unusual  length.  We  need  only  say,  that 
we  see  nothing  in  those  objections  which  requires  us  to  reform 
the  decree  of  the  court  below. 

Upon  the  whole,  the  decree  of  the  Circuit  Court  is  affirmed, 
with  costs. 


ANTOINE  MICHOUD,  AND  OTHERS,  v.  PERRONNE   BERNARDINE 

GlROD,   AND    OTHERS. 

[  This  case  was  decided  by  the  Supreme  Court  of  the  United  States  at  its 
January  Term,  1846,  Associate  Justice  JAMES  M.  WAYNE  delivering  the 
opinion.  The  Court  was  composed  as  stated  on  preceding  page  1 8,  except 
LEVI  WOODBURY  succeeded  JOSEPH  STORY,  deceased,  as  Associate  Justice. 
Reported  in  4  Howard,  503.] 

A  person  can  not  legally  purchase  on  his  own  account  that  which  his  duty  or 
trust  requires  him  to  sell  on  account  of  another,  nor  purchase  on  account  of 
another  that  which  he  sells  on  his  own  account.  He  is  not  allowed  to  unite 
the  two  opposite  characters  of  buyer  and  seller. 

A  purchase,  per  interporitam  pertonam,  by  a  trustee  or  agent,  of  the  particular 
property  of  which  he  hns  the  sale,  or  in  which  he  represents  another,  whether 
he  has  an  interest  in  it  or  not,  carries  fraud  on  the  face  of  it. 

This  rule  applies  to  a  purchase  by  executors,  at  open  sale,  although  they  were  em- 
powered by  the  will  to  sell  the  estate  of  their  testator  for  the  benefit  of  heirs 
and  legatees,  a  part  of  which  heirs  and  legatees  they  themselves  were. 

A  purchase  BO  made  by  executors  will  be  set  aside. 

The  decisions  of  the  courts  of  several  States,  upon  this  subject,  examined  and  re- 
marked upon. 

Relaxations  of  this  rule  of  the  civil  law,  which  were  made  in  some  countries  of 
Europe,  were  not  adopted  by  the  Spanish  law,  and  of  course  never  reached 
Louisiana.  Nor  were  those  relaxations  carried  so  far  as  to  allow  a  testa- 
mentary or  dative  executor  to  buy  the  property  which  he  was  appointed  to 
administer. 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        43 

The  maxims  and  qualifications  of  the  civil  law,  upon  this  point,  examined. 

Although  courts  of  equity  generally  adopt  the  statutes  of  limitation,  yet,  in  a  case 
of  actual  fraud,  they  will  grant  relief  within  the  lifetime  of  either  of  the  par- 
ties upon  whom  the  fraud  is  proved,  or  within  thirty  years  after  it  has  been 
discovered  or  become  known  to  the  party  whose  rights  are  affected  by  it. 

Within  what  time  a  constructive  trust  will  be  barred  must  depend  upon  the  cir- 
cumstances of  the  case,  and  these  are  always  examinable. 

Acquittances  given  to  an  executor,  without  a  full  knowledge  of  all  the  circum- 
stances, where  such  information  had  been  withheld  by  the  executor,  and  men- 
aces and  promises  thrown  out  to  prevent  inquiry,  are  not  binding. 

THIS  case  was  brought  up  by  appeal  from  the  Circuit  Court 
of  the  United  States,  for  the  Eastern  District  of  Louisiana,  sit- 
ting as  a  court  of  equity. 

The  widow  Pargoud  and  others,  defendants  in  this  Court, 
were  complainants  in  the  court  below,  and  obtained  a  decree  in 
their  favor,  from  which  the  other  parties  appealed.  They  al- 
leged, that  a  series  of  fraudulent  transactions  occurred,  com- 
mencing in  1813,  by  which  they  had  been  deprived  of  their 
fair  share  of  the  estate  of  Claude  Fra^ois  Girod,  whose  heirs 
they  were,  and  that  the  chief  agent  in  this  fraud  was  Nicholas 
Girod,  a  brother  of  the  deceased  Claude  Francois  Girod,  and  also 
a  brother  of  some  of  the  complainants,  and  relative  of  the  rest. 

Claude  Francois  Girod  was  a  resident  of  the  parish  of  As- 
sumption, in  the  State  of  Louisiana,  and  died  in  the  month  of 
November,  1813,  leaving  a  last  will  and  testament,  dated  on  the 
30th  of  November,  1812,  and  a  codicil,  dated  on  the  4th  of  No- 
vember, 1813,  which  will  was  admitted  to  probate,  with  the 
codicil,  on  the  8th  of  November,  1813.  He  never  was  married, 
and  left  eight  brothers  and  sisters,  and  the  children  of  a  prede- 
ceased sister.  These  surviving  brothers  and  sisters,  with  the 
exception  of  Jacques,  otherwise  called  Jacques  Antoine  Girod 
(who  was  excluded  by  the  terms  of  the  will),  were  the  legal 
heirs  of  the  deceased  Claude  Francois  Girod,  each  for  the 
one-eighth  part  of  his  estate  and  the  succession.;  and  the  heirs 
and  legal  representatives  of  the  said  predeceased  sister,  the 
legal  heirs  by  representation  of  their  deceased  mother,  for  the 
remaining  eighth  part  of  the  estate. 

The  proceedings  in  the  case  were  exceedingly  complicated. 
There  was  a  bill,  and  an  amended  bill,  and  a  supplemental  bill, 
and  another  amended  bill,  and  .then  another  amended  bill. 


44  MICHOUD  AND  OTHERS  v.  GIROD  AND  OTHERS, 

Instead  of  pursuing  the  case  through  all  these  details,  the  simplest 
course  will  be  to  state  the  charges  in  the  bill,  and  the  documents 
brought  forward  to  sustain  them. 

The  will  of  Claude  Fra^ois  Girod  was  as  follows : 

"I,  Claude  Fran?oia  Girod,  the  legitimate  son  of  Fran?ois  Silvestre  Girod,  de- 
ceased, and  of  the  late  Francois,  born  Dubois,  native  of  Thone,  in  Savoy,  diocese 
of  Geneva,  province  of  France,  and  now  a  resident  of  the  parish  of  Assumption, 
on  Bayou  Lafoufche,  in  the  state  of  Louisiana,  being  about  sixty  years  of  age, 
and  desirous  to  die  in  the  Roman  Catholic  and  Apostolic  religion,  under  which  I 
have  ever  lived,  with  a  firm  belief  in  the  mysteries  of  our  holy  religion,  do  ordain 
this  my  last  will  or  testament,  in  case  I  should  be  overtaken  by  death,  the  hour 
of  which  I  am  uncertain  of;  and  as  it  behooves  all  living  beings  to  settle  their 
temporal  affairs,  when  they  are  in  the  full  enjoyment  of  their  health  and  reason, 
in  order  to  avoid  thereby  the  difficulties  which  arise  when  we  are  laboring  under 
a  dangerous  disease,  which  takes  from  us  the  use  of  our  reasonable  faculties,  and 
consequently  deprives  us  of  the  understanding  and  memory  necessary  to  the 
faithful  and  peaceable  settlement  of  our  family  affairs,  with  a  view  to  avert  from 
our  heirs  the  difficulties  always  prejudicial  to  those  that  are  absent.  Now,  there- 
fore, under  these  circumstances,  I  invoke  the  grace  and  clemency  of  God,  to 
whom  I  recommend  my  soul  when  separated  from  my  body;  and  I  wish  and  or- 
dain, that  the  latter  be  buried  among  faithful  Christians,  with  all  the  usual  rites 
of  our  Mother  Church,  leaving  with  my  testamentary  executors,  hereinafter  named, 
the  performance  of  all  pious  works,  such  as  causing  three  masses  to  be  said  on 
my  behalf  to  my  holy  patron,  as  also  funeral  services,  masses,  etc. 

"  1.  I  declare  that  the  property  I  am  now  possessed  of  are  the  earnings  of 
my  labor  and  savings,  and  consist  of  the  following  items,  to  wit:  Three  houses 
and  several  lots  situated  in  suburb  St.  Mary,  above  the  city  of  New  Orleans, 
and  one  in  Chartres  Street,  now  occupied  by  my  brother,  Nicolas  Girod;  one 
main  plantation,  whereon  I  reside,  situated  in  said  Bayou  Lafourche,  with  all  the 
buildings,  improvements,  and  appurtenances  thereof,  and  being  thirty-one  and  a 
half  arpenta  front,  together  with  the  utensils,  implements  of  husbandry,  animals 
of  all  kind,  and  one  hundred  and  odd  slaves  of  different  ages  belonging  to  me; 
also,  a  quantity  of  lajids  situated  in  the  different  parishes  of  the  bayou,  the  titles 
to  which  I  hold  in  my  possession ;  also,  a  certain  sum  of  money  is  due  to  me, 
which  I  can  not  ascertain  at  present,  but  which  will  be  made  to  appear  by  the 
books  and  obligations  in  my  power;  also,  I  am  the  owner  of  upward  of  two  hun- 
dred and  seventy  bales  of  ginned  cotton,  now  in  my  stores;  also,  I  declnre  that  I 
am  indebted  unto  divers  persons  by  obligations,  and  little  by  accounts,  in  a  sum 
of  about  thirty  thousand  dollars. 

"8.  I  give  and  bequeath  to  my  parish  of  Thfine,  in  Savoy,  to  have  a  solemn 
mass  annually  said  on  my  behalf,  and  to  contribute  to  the  repairs  of  said  church, 
a  sum  of  two  thousand  dollars,  such  being  my  will. 

"  4.  I  give  to  the  poor  of  my  said  parish,  to  be  distributed  among  them  so  as 
to  meet  their  most  pressing  wants,  a  sum  of  one  thousand  dollars,  such  being 
my  will. 

"5,  I  give  and  bequeath  to  the  cousins,  Dodos  Golli6,  of  said  parish,  a  sum 
of  five  hundred  dollars,  such  being  my  will. 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        45 

"6.  I  give  and  bequeath  to  the  brothers  and  sisters,  Joseph  Suard,  Senior, 
and  Antoine  Suard,  Junior,  sons  of  Antoine  Suard,  deceased,  since  about  thirty 
years,  residing  at  Cluse,  in  Fonsigny  (Savoy),  the  sum  of  two  thousand  dollars, 
such  being  my  will. 

"7.  I  give  and  bequeath  to  my  distant  relations  of  said  parish  a  sum  of  five 
hundred  dollars,  to  be  distributed  among  them,  such  being  my  will. 

"  8.  I  give  and  bequeath  to  the  Charity  Hospital  of  Thdne,  in  Savoy,  a  sum 
of  one  thousand  dollars,  such  being  my  will. 

"9.  I  give  and  bequeath  to  the  children  of  my  deceased  sister,  Fran9oise, 
wife  of  Poidebard,  without  prejudicing  their  rights  in  and  to  my  succession,  the 
sum  of  two  thousand  dollars,  to  be  divided  between  them  by  equal  portions,  such 
being  my  will. 

"  10.  I  give  and  bequeath  to  my  sister  Teresa,  wife  of  Quetant,  without  prej- 
udice to  her  rights  in  my  succession,  a  sum  of  one  thousand  dollars,  such  being 
my  will. 

"  11.  I  give  and  bequeath  to  my  god-daughter  and  sister,  Rosalie,  married  at 
Taloire,  her  husband's  name  being  unknown  to  me,  a  sum  of  one  thousand  dollars, 
without  prejudice  to  her  rights  in  my  succession,  such  being  my  will. 

"  12.  I  give  for  once  to  my  brother  James  Girod,  a  sum  of  four  thousand  dol- 
lars, without  any  other  rights  or  pretensions  whatever  in  and  to  my  succession, 
such  being  my  last  will. 

"  13.  I  give  and  bequeath  to  my  brother  Claude,  married,  the  sum  of  two 
thousand  dollars,  without  prejudice  to  his  rights  in  my  succession,  such  being  my 
last  will. 

"  14.  I  give  and  bequeath  to  the  parish  of  Assumption,  for  the  church-wardens 
in  Lafourche,  where  I  now  reside,  a  sum  of  five  hundred  dollars,  for  contributing 
to  the  construction  of  a  church,  such  being  my  will. 

"  15.  I  give  and  bequeath  to  the  mulattress  Fran9oise  Vils,  for  the  faithful 
services  she  has  rendered  to  me  at  my  house,  during  a  long  space  of  time,  a  sum 
of  six  thousand  dollars,  which  Shall  be  paid  to  her  (after  my  death)  one,  two,  and 
three  years,  such  being  my  will. 

"16.  I  give  and  bequeath  to  my  god-daughter  Fran9oise,  a  free  colored 
woman,  the  daughter  of  Rosette,  a  negro  woman,  a  sum  of  fifteen  hundred  dollars, 
such  being  my  last  will. 

"17.  I  give  and  bequeath  to  the  mulattress  Belanie,  wife  of  Colas  Meillen,  a 
sum  of  two  hundred  dollars,  such  being  my  will. 

"18.  I  give  likewise  to  her  younger  sister  Polline,  a  sum  of  two  hundred 
dollars,  such  being  my  will. 

"19.  I  give  and  bequeath  to  my  mulatto  slave  Dominic,  who  is  a  blacksmith 
and  rum-distiller,  his  freedom,  which  he  shall  be  put  in  possession  of  six  months 
after  my  death,  for  his  good  and  faithful  services  to  me. 

"20.  I  nominate  for  my  testamentary  executors  the  following  persons:  my 
brother  Nicolas,  who  is  my  senior,  and  Jean  Fran9ois,  my  junior,  the  former  be- 
ing a  merchant  in  New  Orleans,  and  the  second  is  a  planter,  residing  at  Washita, 
and  in  their  default,  Mr.  Phillipon,  Senior,  merchant  at  New  Orleans,  to  whom  I 
give,  by  the  present  olographic  testament,  full  power  and  authority  as  required 
by  law  to  take  possession  of  all  my  property  present  and  to  come,  to  inventory, 
sell,  and  cause  them  to  be  sold,  as  to  him  will  seem  best  for  the  heirs  of  all  my 
brothers  and  sisters,  present  and  absent,  without  intervention  of  justice,  hereby 
annulling  and  declaring  void  all  other  testaments,  codicils,  and  donations,  mortis 


46          MICHOUD  AND  OTHERS  r.  GIROD  AND  OTHERS, 

causa,  and  other  acts  of  last  will  which  I  may  have  made  previous  to  and  to  the 
prejudice  of  the  present,  which  is  the  only  one  I  adopt  as  being  my  last  will,  in 
order  that  my  heirs  may  inherit  and  enjoy  my  property  with  the  benediction  of 
God  and  mine,  etc. 

"Done  and  passed  on  my  plantation,  at  Lafourche,  the  30th  of  November, 
1812.  (Signed,)  C.  F.  GIROD. 

"J'H  COURRIE,  witnets,    SAINT  FELIX,  witness.    Ne  varietur ." 

The  appellants  assign  for  error  in  the  decree  rendered  against 
them  in  the  court  below : 

1.  That  there  is  a  total  want  of  equity  throughout  the  complainants'  bill, 
and  in  the  evidence  adduced  in  support  of  it. 

2.  That,  under  the  evidence  and  allegations  of  the  bill,  the  complainants 
have  no  claim  in  a  court  of  equity,  by  reason  of  their  long  silence,  laches,  and 
acquiescence  in  the  acts  complained  of  since  1814. 

3.  That  the  cause  of  action,  as  set  forth  by  the  complainants,  is  barred  and 
prescribed  by  lapse  of  time  under  the  laws  of  Louisiana. 

4.  That  the  disallowance  of  the  sums  of  $40,418  and  of  $8,253,  and  the  de- 
cree concerning  the  judgments  for  said  amounts,  is  contradictory  and  in  violation 
of  law. 

6.  That  the  agreements  made  by  two  of  the  complainants  with  the  defendant 
in  1817  are  valid,  obligatory,  and  conclusive  upon  the  parties;  that  the  declara- 
tion of  the  co-executor,  J.  F.  Girod,  has  the  same  effect. 

G.  That  the  discharge  of  J.  F.  Girod,  the  co-executor,  destroys  all  claim  in 
equity  against  the  defendants. 

The  cause  was  argued  by  Mr.  Eustis,  for  the  appellants,  and 
Mr.  Janin,  for  the  appellees. 

Mr.  Justice  WAYNE  delivered  the  opinion  of  the  Court. 

The  conclusions  to  which  we  have  come  in  this  cause  do  not 
require  from  us  any  comment  upon  its  facts. 

We  concur  with  the  learned  judge  in  the  Circuit  Court,  in 
setting  aside  the  purchases  by  which  Nicholas  Girod  and  Jean 
Frai^ois  Girod  became  the  possessors  of  their  testator's  entire 
estate.  But  the  morality  and  policy  of  the  law,  as  it  is  admin- 
istered in  courts  of  equity,  induce  us  to  add,  that  those  purchases 
were  fraudulent  and  void,  and  may  be  declared  to  be  so,  without 
any  further  inquiry,  upon  the  ground  that  they  were  made  by 
the  intervention  of  persons  who  were  nominal  buyers  of  the 
property  for  the  purpose  of  conveying  it  to  the  executors.  Such 
a  transaction  carries  fraud  upon  the  face  of  it,  Lord  Hardwire 
v.  Vernon,  4  Vesey,  Jr.  411  j  14  Vesey,  Jr.  504;  2  Bro.  C.  C. 
410,  note.  It  matters  not,  in  such  a  case,  whether  the  sales  are 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.    47 

made  with  or  without  the  sanction  of  judicial  authority,  or  with 
ministerial  exactness.  The  rule  of  equity  is,  in  every  code  of 
jurisprudence  with  which  we  are  acquainted,  that  a  purchase 
by  a  trustee  or  agent  of  the  particular  property  of  which  he  has 
the  sale,  or  in  which  he  represents  another,  whether  he  has  an 
interest  in  it  or  not — per  intcrpositam  personam — carries  fraud 
on  the  face  of  it.  In  this  instance,  Laignel  and  St.  Felix  were' 
the  instruments  of  the  executors.  They  bid  off  the  property, 
paid  nothing,  received  titles,  and  conveyed  what  they  nominally 
bought  to  the  executors.  In  this  way  Nicholas  Girod  became 
the  purchaser  of  all  the  testator's  property  in  New  Orleans,  and 
himself  and  his  brother  Jean  Francois,  the  other  executor,  were 
joint  purchasers  of  the  lands  and  slaves  in  the  parish  of  Assump- 
tion, and  of  the  testator's  lands  elsewhere.  Jean  Francois,  some 
years  afterward,  sold  out  his  half  of  their  joint  purchase  to 
Nicholas,  for  $70,000.  Thus  the  latter  became  the  possessor  of 
the  entire  estate,  and  held  it  until  he  died,  to  the  exclusion  of 
all  the  other  testamentary  heirs.  Some  of  those  heirs,  and  the 
representatives  of  others  of  them,  now  sue  the  representatives 
of  Nicholas  Girod,  and  seek  to  set  aside  the  purchases  of  the 
executors.  They  allege  that  they  were  fraudulently  made,  ask 
that  they  may  have  assigned  to  them  their  respective  portions 
of  the  estate,  with  an  account  of  rents  and  profits,  excepting 
from  their  claim  for  the  latter  the  moiety  which  had  been  re- 
ceived by  Jean  Francois  Girod.  The  defendants  reply,  and  deny 
fraud  in  fact  or  in  intention  on  the  part  of  the  executors.  They 
declare,  that  the  sales  were  judicially  ordered  and  conducted, 
that  the  purchases  were  rightfully  made,  for  a  fair  price,  at  pub- 
lic auction ;  that  the  complainants  have  no  standing  in  a  court  of 
equity  by  reason  of  their  long  silence,  laches,  and  acquiescence 
in  the  acts  of  which  they  complain,  and  that  their  rights  are 
barred  by  lapse  of  time,  under  the  laws  of  Louisiana.  They 
also  say,  that  receipts  or  acquittances  were  given  to  the  execu- 
tors by  two  of  the  complainants,  which  are  valid  and  obligatory 
upon  them.  The  bill  and  answers,  and  the  arguments  of  the 
learned  counsel  for  the  appellants,  then  involve  the  question  of 
the  right  of  executors  to  purchase  any  part  of  the  estate  which 
they  administer,  for  a  fair  price,'  at  a  public  sale  judicially  or- 
dered and  conducted.  Remarking,  first,  that  an  executor  or 


48          MICHOUD  AND  OTHERS  v.  GIROD  AND  OTHERS, 

administrator  is  in  equity  a  trustee  for  heirs,  legatees,  and  cred- 
itors, we  proceed  to  give  our  opinion  of  the  law  in  respect  to 
purchases  of  the  estate  represented  by  them,  and  of  purchases 
made  by  other  trustees  and  agents,  and  all  persons  gui  negotia 
aliena  yentnt.  The  rule  as  to  persons  incapable  of  purchasing 
particular  property  except  under  particular  restraints,  on  account 
of  the  rules  of  equity,  is  compendiously  given  by  Sir  Edward 
Sugden,  in  his  second  section  of  purchases  by  trustees,  agents, 
etc.  It  has  been  adopted  by  almost  every  subsequent  writer, 
and  we  cite  the  passage  with  confidence,  having  verified  its 
correctness  by  an  examination  of  all  the  cases  cited  by  him ;  by 
an  examination,  also,  of  other  cases  in  the  English  courts,  and 
of  cases  in  the  courts  of  chancery  of  several  of  the  States  in  our 
Union,  sustaining  the  doctrine,  to  the  fullest  extent,  of  the  inca- 
pability of  trustees  and  agents  to  purchase  particular  property, 
for  the  sale  of  which  they  act  representatively,  or  in  whom  the 
title  may  be  for  another.  He  says  :  ll  It  may  be  laid  down  as  a 
general  proposition,  that  trustees — unless  they  are  nominally 
such  to  preserve  contingent  remainders — agents,  commissioners 
of  bankrupts,  assignees  of  bankrupts,  solicitors  to  the  commission, 
auctioneers,  creditors  who  have  been  consulted  as  to  the  mode 
of  sale,  or  any  persons  who,  by  their  connection  with  any  other 
person,  or  by  being  employed  or  concerned  in  his  affairs,  have 
acquired  a  knowledge  of  his  property,  are  incapable  of  pur- 
chasing such  property  themselves,  except  under  the  restraints 
which  will  shortly  be  mentioned.  For  if  persons  having  a  con- 
fidential character  were  permitted  to  avail  themselves  of  any 
knowledge  acquired  in  that  capacity,  they  might  be  induced  to 
conceal  their  information,  and  not  to  exercise  it  for  the  benefit 
of  the  persons  relying  upon  their  integrity.  The  characters  are 
inconsistent.  Emptor  emit  quam  minima  potest,  venditor  vcndit 
qnam  maxima  potcst,"  2  Sugd.  Vendors  and  Purchasers,  109, 
London  ed.,  1824  (a).  The  principle  has  been  extended  to  a 

(a)  Tnulett.— Fox  T.  Mackretk,  2  Bro.  C.  C.  400;  4  Bro.  P.  C.  (Tomlins's)  258, 
Hall  v.  tfoyet,  3  Bro.  C.  C.  483,  and  see  3  Vcscy,  Jr.  748;  Kellick  v.  Flexny,  4 
Bro.  C.  C.  161 ;  Whichcote  v.  Lawrence,  3  Vesey,  Jr.  740 ;  Campbell  T.  Walker,  6  Vesey, 
Jr.  678,  and  Whitaekn  T.  Wfutackre,  Sel.  Chan.  Cnscs,  18. 

Jtemainderi.— See  Parkt  T.  White,  11  Vesey,  Jr.  226. 

Agcntt.—  York  Jiuildingi  Co.  T.  Mackenzie  ;  Lowlher  v.  Lowther,  13  Vesey,  Jr. 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.    49 

X1 

purchase  by  an  attorney  from  his  client  whilst  the  relation  sub- 
sists, Belleiv  v.  Russell,  Ball  &  Beatty,  9G  ;  9  Vesey,  Jr.  296  ; 
13  Vesey,  Jr.  133.  As  to  gifts,  Lord  Selsey  v.  Rlioades,  2  Sim. 
&  Stu.  41 ;  Williams  v.  Llewellyn,  2  You.  &  Jer.  G8  ;  Champion 
v.  Rigby,  1  Russ.  &  Myl.  539.  Nor  can  an  arbitrator  buy  up  the 
unascertained  claims  of  any  of  the  parties  to  the  reference,  Blan- 
nerhassct  v.  Day,  2  Ball  &  Beatty,  116  ;  Cane  v.  Lord  Allen,  2 
Dow,  289.  Where  a  person  can  not  purchase  the  estate  him- 
self, he  can  not  buy  it  as  agent  for  another,  9  Vesey,  Jr.  248  ; 
ex parte  Bennett,  10  Vesey,  Jr.  381, 

The  general  rule  stands  upon  our  great  moral  obligation  to 
refrain  from  placing  ourselves  in  relations  which  ordinarily  ex- 
cite a  conflict  between  self-interest  and  integrity.  It  restrains 
all  agents,  public  and  private ;  but  the  value  of  the  prohibition 
is  most  felt,  and  its  application  is  more  frequent,  in  the  private 
relation?  in  which  the  vendor  and  purchaser  may  stand  toward 
each  other.  The  disability  to  purchase  is  a  consequence  of  that 
relation  between  them  which  imposes  on  the  one  a  duty  to  pro- 
tect the  interest  of  the  other,  from  the  faithful  discharge  of 
which  duty  his  own  personal  interest  may  withdraw  him.  In 
this  conflict  of  interest,  the  law  wisely  interposes.  It  acts  not 
on  the  possibility,  that,  in  some  cases,  the  sense  of  that  duty 
may  prevail  over  the  motives  of  self-interest,  but  it  provides 
against  the  probability  in  many  cases,  and  the  danger  in  all 
cases,  that  the  dictates  of  self-interest  will  exercise  a  predomi- 
nant influence,  and  supersede  that  of  duty.  It  therefore  pro- 


95;  see  Watt  v.  Grove,  2  Sch.  &  Lef.  492;  Whitcomb  v.  Minchin,  5  Madd.  91;    Wood- 
house  v.  Meredith,  1  Jac.  &  Walk.  204. 

Commissioners  of  Bankrupts. — Ex  parte  Bennett,  10  Vesey,  Jr.  381;  ex  partc 
Dumbell,  August  13,  1806,  Mont,  notes,  33  cited;  ex  parte  Harrison,  1  Buck.  17. 

Assignees  of  Bankrupts. — Ex  parte  Reynolds,  5  Vesey,  Jr.  707;  ex  parte  Laccy, 
6  Vesey,  Jr.  625;  ex  parte  Bage,  4  Madd.  459;  ex  parte  Badcock,  1  Mont.  & 
Mac.  231. 

Solicitors  to  the  Commission. —  Owenv.Foulkes,  6  Vesey,  Jr.  630,  note  b.;  exparie 
Linu-ood;  ex  parte  Churchill,  8  Vesey,  Jr.  343  cited;  ex  parte  Bennett,  10  Vesey,  Jr. 
381;  ex  parte  Dumbell,  August  13,  1806,  Moiit.,  notes,  cited;  see  12  Vesey,  Jr.  372; 
3  Mer.  200. 

Auctioneers,  creditors  consulted  as  to  mode  of  sale,  or  any  persons  who,  by  their  con- 
nection with,  or  concern  in,  the  affairs,  have  acquired  a  knowledge,  etc. — See  ex  parte 
Hughes,  6  Vesey,  Jr.  C17;  Coles  v.  Trecothick,  9  Vesey,  Jr.  234;  1  Smith,  233; 
Oliver  v.  Court,  8  Price,  127. 

4 


50  MICHOUD  AND  OTHERS  v.  GIROD  AND  OTHERS, 

hibits  a  party  from  purchasing  on  his  own  account  that  which 
his  duty  or  trust  requires  him  to  sell  on  account  of  another,  and 
from  purchasing  on  account  of  another  that  which  he  sells  on  his 
own  account.  In  effect,  he  is  not  allowed  to  unite  the  two  op- 
posite characters  of  buyer  and  seller,  because  his  interests,  when 
he  is  the  seller  or  buyer  on  his  own  account,  are  directly  con- 
flicting with  those  of  the  person  on  whose  account  he  buys  or 
sells,  2  Barge's  Comm.  459.  Cases  have  been  frequently  decided 
in  the  courts  of  Louisiana,  which  maintain  the  rule  in  all  its 
integrity.  In  Pennsylvania  it  is  enforced,  though,  on  looking 
over  its  reports,  we  find  a  case,  but  unsustained  by  any  reference 
to  adjudged  cases,  in  which  it  is  said  that  an  executor  might 
buy  at  a  sale  of  the  testator's  effects,  if  he  did  so  for  a  fair  price, 
at  public  auction.  In  Maryland,  the  courts  of  chancery  carry 
out  the  rule  to  the  fullest  extent  of  the  principles  upon  which  it 
is  founded,  and  as  they  have  just  been  stated  by  us.  In  the 
case  of  Wormley  v.  Wormley,  8  "Wheat.  421,  this  Court  declared 
that  no  rule  is  better  settled,  than  that  a  trustee  can  not  become 
the  purchaser  of  the  trust  estate.  He  can  not  be,  at  the  same 
time,  vendor  and  vendee.  It  had  been  previously  ruled,  in  the 
case  of  Prevost  v.  Grate,  6  Wheat.  481,  and  this  Court  after- 
ward, in  Ringo  ct  al.  v.  Binns  ct  al.,  reaffirmed  the  rule,  by  its 
application  to  an  agent  who  had  bought  land  to  which  his  prin- 
cipal was  in  equity  entitled.  It  said,  "The  proposition  laid 
down  by  this  court  is,  that  if  an  agent  discovers  a  defect  in  the 
title  of  his  principal  to  land,  he  can  not  misuse  it  to  acquire  a 
title  for  himself;  and  if  he  does,  that  he  will  be  held  as  a  trustee 
holding  for  his  principal,"  10  Pet.  269,  281  ;  see  also  the  case 
of  Oliver  v.  Piatt,  3  How.  333.  It  is  also  affirmed  in  Church  v. 
Mftrine  Insurance  Company,  1  Mason,  341,  that  an  agent  or 
trustee  can  not,  directly  or  indirectly,  become  the  purchaser  of 
the  trust  property  which  is  confided  to  his  care.  We  scarcely 
need  add,  that  a  purchase  by  a  trustee  of  his  cestui  que  trust, 
sni  juris,  provided  it  is  deliberately  agreed  or  understood  be- 
tween them  that  the  relation  shall  be  considered  as  dissolved, 
;<  and  there  is  a  clear  contract,  ascertained  to  be  such,  after  a 
jealous  and  scrupulous  examination  of  all  the  circumstances, 
and  it  is  clear  that  the  cestui  quc  trust  intended  that  the  trustee 
should  buy,  and  there  is  no  fraud,  no  concealment,  and  no  advan- 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        51 

tage  taken  by  the  trustee  of  information  acquired  by  him  as 
trustee,"  will  be  sustained  in  a  court  of  equity.  But  it  is  diffi- 
cult to  make  out  such  a  case,  where  the  exception  is  taken, 
especially  when  there  is  any  inadequacy  of  price,  or  any  ine- 
quality in  the  bargain,  Coles  v.  Trecotliick,  9  Vesey,  246  ;  Fox 
v.  Mackretli,  2  Bro.  C.  C.  400 ;  Gibson  v.  Jeyes,  6  Vesey,  277 ; 
WMclicote  v.  Lawrence,  3  Vesey,  740 ;  Campbell  v.  Walker,  5 
Vesey,  678 ;  Ayliffe  v.  Murray,  2  Atk.  59.  And  therefore,  if  a 
trustee,  though  strictly  honest,  should  buy  for  himself  an  estate 
from  his  cestui  que  trust,  and  then  should  sell  it  for  more,  accord- 
ing to  the  rules  of  a  court  of  equity,  from  general  policy,  and 
not  from  any  peculiar  imputation  of  fraud,  he  would  be  held  still 
to  remain  a  trustee  to  all  intents  and  purposes,  and  not  be  per- 
mitted to  sell  to  or  for  himself,  1  Story's  Com.  on  Eq.,  2d  edit., 
317 ;  Fox  v.  Mackretli,  2  Bro.  C.  C.  400 ;  S.  C..  2  Cox,  320,  327. 
In  New  York  there  has  been  no  relaxation  of  it,  since  the 
decision  in  the  case  of  Davoue  v.  Fanning,  2  Johns.  252.  It 
is  a  critical  and  able  review  of  the  doctrine,  as  it  had  been  ap- 
plied by  the  English  courts  of  chancery  from  an  early  day,  and 
has  been  received,  with  very  few  exceptions,  by  our  State 
chancery  courts,  as  altogether  putting  the  rule  upon  its  proper 
footing.  Indeed,  it  is  not  too  much  to  say,  that  it  has  secured 
the  triumph  of  the  rule  over  all  qualifications  and  relaxations  of 
it  in  the  United  States,  to  the  same  extent  that  had  been  achieved 
for  it  in  England  by  that  great  chancellor,  Lord  ELDON.  Da- 
voue v.  Fanning  was  the  case  of  an  executor  for  whose  wife  a 
purchase  had  been  made  by  one  Hedden,  at  public  auction,  bona 
fide,  for  a  fair  price,  of  a  part  of  the  estate  which  Fanning  ad- 
ministered, and  the  prayer  of  the  bill  was,  that  the  purchase 
might  be  set  aside,  and  the  premises  resold.  The  case  was  ex- 
amined with  a  special  reference  to  the  right  of  an  executor  to 
buy  any  part  of  the  estate  of  his  testator.  And  it  was  affirmed, 
and  we  think  rightly,  that  if  a  trustee,  or  person  acting  for 
others,  sells  the  trust  estate,  and  becomes  himself  interested  in 
the  purchase,  the  cestuis  que  trust  are  entitled,  as  of  course,  to 
have  the  purchase  set  aside,  and  the  property  re-exposed  to  sale, 
under  the  direction  of  the  court.  And  it  makes  no  difference 
in  the  application  of  the  rule,  that  a  sale  was  at  public  auction, 
~bona  fide,  and  for  a  fair  price,  and  that  the  executor  did  not 


52          MICHOUD  AND  OTHERS  v.  GIROD  AND  OTHERS, 

purchase  for  himself,  but  that  a  third  person,  by  previous  ar- 
rangement with  the  executor,  became  the  purchaser,  to  hold  in 
trust  for  the  separate  use  and  benefit  of  the  wife  of  the  executor, 
who  was  one  of  the  cestuis  que  trust,  and  who  had  an  interest  in 
the  land  under  the  will  of  the  testator.  The  inquiry,  in  such  a 
case,  is  not  whether  there  was  or  was  not  fraud  in  fact.  The 
purchase  is  void,  and  will  be  set  aside  at  the  instance  of  the  ces- 
tiii  que  trust,  and  a  resale  ordered,  on  the  ground  of  the  tempta- 
tion to  abuse,  and  of  the  danger  of  imposition  inaccessible  to  the 
eye  of  the  court.  We  are  aware  that  cases  may  be  found,  in 
the  reports  of  some  of  the  chancery  courts  in  the  United  States, 
in  which  it  has  been  held  that  an  executor  may  purchase,  if  it 
be  without  fraud,  any  property  of  his  testator,  at  open  and  public 
sale,  for  a  fair  price,  and  that  such  purchase  is  only  voidable, 
and  not  void,  as  we  hold  it  to  be.  But  with  all  due  respect  for 
the  learned  judges  who  have  so  decided,  we  say  that  an  executor 
or  administrator  is,  in  equity,  a  trustee  for  the  next  of  kin,  lega- 
tees, and  creditors,  and  that  we  have  been  unable  to  find  any  one 
well-considered  decision,  with  other  cases,  or  any  one  case  in  the 
books,  to  sustain  the  right  of  an  executor  to  become  the  pur- 
chaser of  the  property  which  he  represents,  or  any  portion  of  it, 
though  he  has  done  so  for  a  fair  price,  without  fraud,  at  a  public 
sale.  Why  should  the  rule  b*e  relaxed  in  the  case  of  persons 
most  frequently  exposed  to  the  temptations  of  self-interest,  who 
may  yield  to  it  more  readily  than  any  others,  with  a  larger  im- 
punity, if  the  day  of  equitable  retribution  shall  ever  come  for 
those  who  have  been  defrauded  ?  Is  it  not  better  that  the  cause 
of  the  evil  shall  be  prohibited,  than  that  courts  of  equity  shall  be 
relied  upon  to  apply  the  remedy  in  particular  cases,  by  inquir- 
ing into  all  the  circumstances  of  a  case,  whether  there  has  or 
lias  not  been  fraud  in  fact  ?  Is  the  rule  to  be  relaxed,  in  the 
case  of  executors,  in  respect  to  all  persons  interested  in  the 
estate,  or  only  to  such  of  them  as  are  sui  juris  f  And  if  only 
to  those  who  are  sui  juris,  why  in  case  of  an  executor  as  to  such 
persons,  when  the  rule  has  never  been  relaxed  by  any  court  of 
equity  to  permit  purchases  by  any  other  trustee  or  agent  of  one 
who  is  sui  juris  f  Shall  it  be  relaxed  in  cases  of  those  who  are 
interested  in  the  estate  and  who  are 'not  sui  juris  or  minors? 
Then  other  remedies  must  be  devised  to  protect  their  interests 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        53 

than  that  which  experience  has  shown  to  be  alone  efficacious.  It 
is,  that  when  a  trustee  for  one  not  sui  juris  sees  that  it  is  abso- 
lutely necessary  that  the  estate  must  be  sold,  and  he  is  ready  to 
give  more  for  it  than  any  one  else,  that  a  bill  should  be  filed, 
and  he  should  apply  to  the  court  by  motion,  to  let  him  be  a  pur- 
chaser. This  is  the  only  way  he  can  protect  himself.  There  are 
cases  in  which  the  court  will  permit  it,  Campbell  v.  Walker,  5 
Vesey,  Jr.  478 ;  13  Vesey,  Jr.  601 ;  1  Ball  &  Beatty,  418  (a)'. 

Such  is  the  proceeding  adopted  in  Louisiana,  when  property 
in  which  a  minor  is  interested  is  offered  for  sale,  as  may  be  seen 
by  the  case  in  5  Louisiana  R.  16,  M'Carty  v.  Steam  Cotton  Press 
Company  et  al.  The  property  was  sold  at  auction,  and  the 
mother  of  the  minor  became  the  purchaser.  It  was  contended 
that  this  purchase  was  null  and  void,  because  the  property  had 
descended  to  the  children  immediately  after  the  death  of  the 
father,  and  the  mother,  who,  by  the  effect  of  the  law,  was  their 
natural  tutor,  could  not  buy  it.  The  court  said  it  was  a  general 
rule.  But  it  having  been  shown  that  the  mother  and  purchaser 
had  petitioned  the  Court  of  Probates  for  a  ratification  of  the  sale, 
and  that  the  court  had  ratified  it  upon  the  advice  of  a  family  meet- 
ing, the  sale  was  confirmed.  And  the  court  held,  that  under  the 
Spanish  law  (20)  a  tutor  could  purchase  the  property  of  his 
ward,  with  the  permission  of  the  judge. 

We  have  said  more  upon  the  relaxation  of  the  rule  in  the 
case  of  executors  than  we  would  have  done,  if  the  learned  coun- 
sel for  the  appellants  had  not  pressed,  as  an  exemption  from  the 
rule,  purchases  made  by  executors  without  fraud,  at  open  sale, 
especially  when  by  the  will  they  were  empowered  to  sell  the 
estate  of  their  testator  for  the  benefit  of  heirs  and  legatees,  and 
were  heirs  or  legatees  themselves.  And  if  it  had  not  been  urged 
that  the  decisions  of  the  Supreme  Court  of  Louisiana  were  un- 
safe guides  in  interpreting  the  Spanish  laws  in  respect  to  the 
incapacity  of  persons  to  purchase  at  judicial  sales  particular 
property,  on  account  of  the  official  or  financiering  relation  in 
which  they  stood  to  the  persons  who  owned  the  property.  It 
was  supposed  that  the  qualifications  of  the  rule  by  the  civil  law 
embraced  executors,  or  might  do  so  by  the  reason  upon  which 

(a)  Such  continues  to  be  the  rule,  Norman  v.  Gorman,  6  Bush's  Ky.  496. 


54          MICHOUD  AND  OTHERS  r.  GIROD  AND  OTHERS, 

those  qualifications  were  sustained.  It  imposes  upon  us  the  task 
of  showing  that  the  relaxations  of  the  rule  by  the  civil  law  were 
never  permitted  by  the  Spanish  law  which  prevailed  in  Louis- 
iana, and  were  never  extended  under  the  civil  law,  to  permit 
the  executor  testamentarius  or  executor  dativus  to  buy  the  prop- 
erty which  he  was  appointed  to  administer.  It  is  a  subject  of 
curious  and  instructive  examination  to  trace  the  rule  or  prohibi- 
tion, in  the  course  of  its  application  under  the  jurisprudence  of 
different  nations.  In  all  of  them,  there  were  limited  and  occa- 
sional relaxations  of  the  rule  in  particular  cases,  in  what  are 
sometimes  called  hard  cases,  but  in  no  one  nation  have  purchases 
by  executors  been  permitted,  as  a  relaxation  of  the  civil  law  rule. 
For  a  general  historical  examination  of  the  subject,  we  have  not 
time ;  we  wish  we  had.  A  brief  examination,  however,  of  the 
qualifications  of  the  rule  by  the  civil-  law  will  not  be  inappro- 
priate upon  an  appeal  from  a  court  held  in  Louisiana,  where  the 
civil  law  exists  in  a  modified  form,  and  is  still  often  the  rule  of 
decision  by  its  enlightened  jurists.  The  prohibition  of  the  civil 
law  is, thus  expressed:  "Tutor  rem  pupilli  emere  non  potest  ; 
idcmque  porrigendum  est  ad  similia,  id  est,  ad  curatorcs,  procura- 
tores,  et  qui  negotia  aliena  gerunt,"  Dig.,  Lib.  18,  tit.  1,  1.  34; 
Inst.,  Lib.  1,  tit.  21,  23. 

The  rule  as  expressed  embraces  eveiy  relation  in  which 
there  may  arise  a  conflict  between  the  duty  which  the  vendor 
or  purchaser  owes  to  the  person  with  whom  he  is  dealing,  or  on 
whose  account  he  is  acting,  and  his  own  individual  interest. 
Nor  was  it  ever  relaxed  or  qualified  by  the  civil  law,  further 
than  to  allow  the  guardian  to  purchase  the  property  of  the  ward, 
palam  ct  bona  fide,  at  public  auction.  "  Cum  ipse  tutor  nihil  ex 
lonis  pupilli,  quce  distrahi  possipit,  comparare  palam  et  bona  fide 
prohilctur;  multo  magis  uxor  ejus  hoc  facere  potest,"  Cod.,  Lib. 
4,  tit.  38,  1.  5.  But  foreseeing  the  mischief  which  might  grow 
out  of  the  relaxation,  it  required  that  the  purchase  must  be  made 
by  the  guardian  himself,  palam  et  bona  fide,  and  not  per  interpos- 
itam  pcrsonam.  "  Scd  si  per  interpositam  personam  rem  pupilli 
emerit,  in  ea  causa  tit  cmptio  nullius  momenti  sit,  quia  non  bona 
fide  r  !<!<•{  it  r  rem  gessisse.  Et  ita  est  rescriptum  a  D.  Severo  et 
Antonino,"  Dig.,  Lib.  26,  tit.  5,  1.  5,  sec.  3.  A  purchase  by  a 
guardian  from  his  co-guardian  was  permitted,  if  it  took  place  in 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.        55 

public,  and  bona  fide.  u  Item  ipse  tutor  et  emptoris  et  venditoris 
officio  fungi  non  potest.  Sed  enim  si  contutorcm  liabeat,  cujus 
auctoritas  sufficit,  procid-dubio  emere  potest.  Sed  si  mala  fide 
emptio  intercesserit,  nullius  erit  momenti,  ideoque  nee  usucapere 
potest.  Sane,  si  suce  cetatis  factus  comprobaverit  emptionem,  con- 
tractus  valet,"  Dig.,  Lib.  26,  tit.  8,  1.  5,  sec.  2. 

The  guardian  might  purchase  at  a  sale  made  at  the  suit  of  a 
creditor.  "Si  creditor  pupilli  distrahat,  ceque  emere  bonafide  po- 
terit,"  Dig.,  Lib.  26, 1.  5,  sec.  5.  Such  is  the  extent  of  the  qualifi- 
cation of  the  rule  of  the  civil  law.  And,  its  limitation  not  being 
well  understood,  persons  have  often  been  misled  to  apply  it  to 
what  they  supposed  to  be  analogous  agencies,  such  as  executors, 
when  there  was  no  authority  either  in  the  text  of  the  civil  law, 
or  in  the  practice  under  it,  for  doing  so.  But,  further,  those 
qualifications  of  the  rule  mentioned  were  confined  in  practice  to 
those  territories  in  Europe  in  which  the  civil  law  prevailed 
without  modification.  And  it  is  remarkable,  considering  what 
were  the  influences  upon  Christendom  of  the  civil  law,  after  its 
'  discovery  in  the  twelfth  century — and  when  not  until  some  time 
after  it  began  to  be  used  as  a  rule  of  law  by  which  public  and 
private  rights  were  determined — when  in  the  fifteenth  and  six- 
teenth centuries  it  was  the  study  of  the  wisest  men, — it  is  re- 
markable that  the  qualifications  of  the  rule,  as  they  have  been 
stated,  were  considered  imperfections,  and  were  rejected  by 
every  nation  in  Europe  whose  codes  are  generally  admitted  to 
have  been  compiled  from  the  civil  law,  with  an  intimate  knowl- 
edge of  human  nature,  as  it  has  always  shown  itself  in  the  busi- 
ness of  life.  Here,  appropriate  to  what  has  been  just  said,  is  the 
language  of  Pothier :  "Nous  ne  pouvons  acheter,  ni  par  nous- 
memes,  ni  par  personnes  interposees,  les  choses  que  font  partie  des 
biens  dont  nous  avons  V administration  ;  ainsi  un  tuteur  ne  peut 
acheter  les  choses  qui  appartiennent  a  son  mineur  ;  un  administra- 
teur  ne  peut  aclieter  aucune  chose  de  bien  dont  il  a  I' administra- 
tion,'' Tr.  du  Contrat  de  Vente,  part  1,  n.  13.  The  rule  of  the 
civil  law,  without  qualification,  is  adopted  in  the  codes  of  Hol- 
land. li  Quce  vero  de  tutoribus  cauta,  ea  quoque  in  curatoribus, 
procuratoribus,  testamentorum  cxecutoribus,  aliisque  similibus,  qui 
aliena  gerunt  negotia,  probanda  sunt,''  Voet,,  Lib.  18,  tit.  1,  n. 
9;  2  Burge's  Comm.  463.  In  Spain,  the  rule  was  enforced 


56  MICHOUD  AND  OTHERS  v.  GIROD  AND  OTHERS, 

without  relaxation,  and  with  stern  uniformity.  Judge  M'CALEB 
cites  in  his  opinion,  from  the  Novissima  Recopilacion,  the  rule, 
in  the  following  words:  "  No  man,  who  is  testamentary  executor 
or  guardian  of  minors,  nor  any  other  man  or  woman,  can  pur- 
chase the  property  which  they  administer,  and  whether  they 
purchase  publicly  or  privately  the  act  is  invalid,  and  on  proof 
being  made  of  the  fact,  the  sale  must  be  set  aside."  This  was 
the  law  of  Louisiana  when  the  executors  in  this  instance  made 
their  purchases,  and  it  is  conclusive  of  the  invalidity. 

We  have  thus  shown,  that  those  purchases  are  fraudulent 
and  void,  from  having  been  made  per  intcrpositam  personam, 
and  if  they  were  not  so  on  that  account,  that  they  are  void  by 
the  rule  in  equity  in  the  courts  of  England,  and  as  it  prevails 
in  the  courts  of  equity  in  the  United  States.  It  has  also  been 
shown,  that  they  are  void  by  the  law  of  Louisiana,  as  it  was 
when  they  were  made  by  the  executors,  and  that  such  pur- 
chases never  were  countenanced  in  that  state  by  any  qualifica- 
tion of  the  civil  law  rule  prohibiting  purchases  by  those  who 
stood  in  such  fiduciary  relations  to  others;  that  the  act  could 
not  be  generally  dune,  without  creating  a  conflict  between  self- 
interest  and  integrity.  In  every  aspect  in  which  we  have 
viewed  this  case,  we  are  called  upon  to  direct  that  the  purchases 
made  by  Nicholas  and  Jean  Francois  Girod  of  their  testator's 
estate  should  be  set  aside.  We  shall  order  it  to  be  done.  Nor 
do  we  think  that  the  complainants  have  lost  their  rights  by  neg- 
ligence, or  by  the  lapse  of  time.  We  can  only  see  in  their  con- 
duct the  fears  and  forbearance  of  dependent  relatives,  far  distant 
from  the  scene  of  the  transactions  of  which  they,  complain,  desir- 
ous of  having  what  was  due  to  them,  and  suspecting  it  had  been 
withheld,  but  unwilling  to  believe  that  they  had  been  wronged 
by  brothers,  with  whom  they  hid  been  associated  in  a  common 
interest  by  another  brother  who  was  dead.  In  a  case  of  actual 
fraud,  courts  of  equity  give  relief  after  a  long  lapse  of  time, 
much  longer  than  has  passed  since  the  executors,  in  this  instance, 
purchased  their  testator's  estate.  In  general,  length  of  time  is 
no  bar  to  a  trust  clearly  established  to  have  once  existed ;  and 
where  fraud  is  imputed  and  proved,  length  of  time  ought  not  to 
exclude  relief,  Prcvost  v.  Grate,  G  Wheat.  481.  Generally 
speaking,  when  a  party  has  been  guilty  of  such  laches  in  prose- 


IN  THE  SUPREME  COURT  OF  THE  UNITED  STATES.    57 

cuting  liis  equitable  title  as  would  bar  him  if  his  title  were  solely 
at  law,  he  will  be  barred  in  equity,  from  a  wise  consideration  of 
the  paramount  importance  of  quieting  men's  titles,  and  upon 
the  principle  that  expedit  reipublicce  ut  sit  finis  litium ;  although 
the  statutes  of  limitations  do  not  apply  to  any  equitable  demand, 
courts  of  equity  adopt  them,  or  at  least  generally  take  the  same 
limitations  for  their  guide,  in  cases  analogous  to  those  in  which 
the  statutes  apply  at  law,  10  Vesey,  467;  1  Cox,  149.  Still, 
within  what  time  a  constructive  trust  will  be  barred  must  de- 
pend upon  the  circumstances  of  the  case,  Boone  v.  ChiUs,  10 
Pet.  177.  There  is  no  rule  in  equity  which  excludes  the  con- 
sideration of  circumstances,  and  in  a  case  of  actual  fraud,  we 
believe  no  case  can  be  found  in  the  books  in  which  a  court  of 
equity  has  refused  to  give  relief  within  the  lifetime  of  either  of 
the  parties  upon  Avhom  the  fraud  is  proved,  or  within  thirty 
years  after  it  has  been  discovered  or  becomes  known  to  the 
party  whose  rights  are  affected  by  it.  In  this  case,  that  time 
has  not  elapsed  since  the  executors  made  their  purchases,  and 
it  is  not  pretended  that  they  were  known  to  any  of  the  com- 
plainants until  the  year  1817,  and  not  then,  except  by  the 
exhibition  of  an  account  by  the  executors  to  some  of  the  com- 
plainants, with  declarations  that  every  thing  had  been  fairly 
done  with  a  view  to  save  the  honor  of  the  testator  and  the 
interests  of  those  who  were  the  objects  of  his  bounty.  In  this 
view  of  the  case,  it  is  not  necessary  for  us  to  consider  the  time 
within  which  remedies  are  barred,  or  property  may  be  acquired 
by  prescription  under  the  laws  of  Louisiana.  We  would  will- 
ingly otherwise  do  so,  for  the  result  would  show  the  same  har- 
mony in  the  application  of  the  rules  of  the  civil  law  and  those 
of  Louisiana  upon  prescription  with  the  rules  prevailing  in 
courts  of  equity  in  England  and  the  United  States,  as  we  trust 
has  been  shown  to  exist  between  them  in  the  prohibition  of  an 
executor  to  buy  the  estate  of  his  testator. 

The  receipts  or  acquittances  given  by  two  of  the  complain- 
ants to  the  executors  do  not  affect  their  rights.  They  were  ob- 
viously given  without  full  knowledge  of  all  the  circumstances 
connected  with  the  disposal  and  management  of  the  estate. 
Indeed,  it  is  plain  that  such  information  had  been  withheld  by 
the  executors.  It  is  true  that  an  account  was  presented  to  them, 


58  MICHOUD  AND  OTHERS  v.  GIROD  AND  OTHERS. 

with  official  signatures  to  it,  but  without  vouchers  of  any  kind 
to  verify  its  correctness,  and  it  was  accompanied  by  a  letter 
from  Nicholas  Girod,  in  which  menaces  of  displeasure  are  min- 
gled with  intimations  of  future  kindness. 

We  shall  also  direct  the  official  proceedings  which  were  had 
upon  the  account  of  Nicholas  Girod,  against  the  estate  of  Claude, 
to  be  set  aside  and  annulled.  But  there  will  be  allowed  to  the 
representatives  of  Nicholas,  in  the  settlement  of  the  estate,  the 
sum  of  86,574.20,  with  interest  at  five  per  cent.  The  proofs  in 
the  cause  show  that,  a  few  months  before  the  death  of  the  testa- 
tor, there  had  been  a  settlement  of  accounts  between  him  and 
Nicholas,  and  we  allow  that  amount,  as  it  is  charged  in  the  gen- 
eral account,  disallowing  all  the  other  items.  We  suppose  it  to 
be  an  inadvertency  in  drawing  up  the  decree,  that  the  sum  just 
mentioned  was  not  allowed,  as  the  learned  judge,  ia.  his  opinion, 
states  that  a  settlement  had  taken  place,  with  that  result. 

We  shall  also  direct  that  the  actual  cost  of  all  permanent 
improvements  which  were  made  upon  any  part  of  the  estate  by 
Nicholas  Girod  shall  be  allowed  to  his-  representatives,  with  in- 
terest at  five  per  cent  in  the  settlement  which  shall  be  made 
with  the  complainants  and  the  other  persons  having  anunterest 
under  the  will  of  Claude.  And  also  an  allowance  for  taxes,  and 
the  expenses  and  cost  paid  in  recovering  the  property  gained  by 
alluvion.  A  reference  to  a  master  will  be  directed.  We  regret 
to  perceive  from  the  record,  that  all  the  persons  who  are  inter- 
ested in  the  estate  of  Claude  F.  Girod  are  not v  parties  to  this 
proceeding.  We  shall  direct,  that  they  shall  be  permitted  to 
make  themselves  parties,  if  they  please  to  become  so.  But  in 
giving  the  order,  it  is  not  intended  to  delay  those  from  receiv- 
ing their  portions  in  whose  behalf  this  decree  is  made.  The 
fruits  of  their  vigilance  can  be  apportioned  according  to  their 
respective  rights  in  the  estate,  when  one  of  the  original  testa- 
mentary heirs  claims ;  and  the  Circuit  Court,  in  the  further  pro- 
ceedings in  the  cause  under  the  mandate  of  this  Court,  will  of 
course  take  care  to  ascertain  who  are  the  representatives  of 
others  6f  them  who  are  dead. 

Jean  Fran9ois  Girod  is  not  a  party  in  this  cause,  and  there- 
fore we  can  give  no  decree  against  him,  but  should  he  offer  to 
become  a  party  for  the  purpose  of  claiming  what  under  the  will 


THE  YORK  ETC.  RAILWAY  COMPANY  v.  HUDSON,  fcf^-5  9—  *\Q  t 


was  his  portion  of  the  estate  of  Claude,  or  should  it  be  claimed 
by  any  representative  of  his,  we  think  it  right  to  remark,  for 
the  purpose  of  preventing  further  litigation  in  this  matter,  that 
such  claim  will  be  subject  to  all  the  equities  subsisting  between 
Jean  Fra^ois  and  Nicholas,  and  especially  to  the  allowance  to 
the  representatives  of  Nicholas  of  the  purchase-money  which 
was  given  by  Nicholas  to  Jean,  for  the  one-half  of  their  joint 
purchase  of  the  property  of  their  testator,  with  interest  at  the 
rate  according  to  their  contract  up  to  the  times  when  the  pur- 
chase-money was  paid,  and  afterward  at  five  per  cent. 


THE  YORK  AND  NORTH  MIDLAND  RAILWAY  COMPANY 
v.  HUDSON  (a). 

[This  case  was  decided  in  the  English  Rolls  Cottrt,  Sir  JOHN  ROMILLY, 
Master  of  the  Rolls,  in  1853.  Reported  in  16  Beavan,  486.] 

A  general  meeting  of  a  railway  company  placed  12,050  shares  in  a  projected  ex- 
tension line  at  the  disposal  of  the  directors.  Held,  that  the  disposal  was 
merelyas  trustees  for  the  company,  and  not  for  their  own  benefit;  and  Hud- 
son, who  was  the  chairman  (and  exercised  uncontrolled  authority  in  the  con- 
duct of  the  concerns  of  the  company),  having  sold  a  considerable  part  of  such 
shares  at  a  premium,  was  held  liable  to  account  to  the  company  for  their 
produce,  with  interest  at  5  per  cent.  Held,  also,  that  he  could  not  retain  the 
profits,  either  as  a  large  land-owner  on  the  line,  or  as  a  remuneration  for  his 
great  services,  or  on  the  ground  of  the  acquiescence  of  the  shareholders,  to 
be  inferred  from  a  presumed  knowledge  of  the  share-book. 

The  chairman  of  a  railway  company  allotted  a  number  of  the  unappropriated 
shares  to  his  nominees;  they  were  sold  at  a  premium,  and  the  produce  re- 
ceived by  him.  Held,  that,  as  trustee,  he  was  bound  to  the  company  for  the 
profit  made. 

The  chairman  of  a  railway  company  appropriated  various  unallotted  shares  to  the 
use  of  various  persons,  whose  names  he  did  not  mention,  in  order  to  secure 
or  reward  services  which  he  declined  to  state,  but  which  it  was  insinuated 
was  in  the  nature  of  "secret  service  money."  Held,  that  if  the  defendant 
had  applied  the  property  of  the  company  in  a  manner  which  would  not  bear 
the  light,  he  must  suffer  the  consequences;  and  that  being  charged  with  the 
receipt  of  the  money,  he  could  not  discharge  himself  by  the  suggestion  of 
such  an  application. 

(a)  The  intelligent  reader  will  readily  recognize  in  this  name,  the  "  Great 
English  Railway  King"  of  the  "flush  times"  in  railroad  speculations  in  that 
country.  He  is  but  recently  reported  as  having  died  in  poverty  and  obscurity 
in  Paris. 


60         THE  YORK  ETC.  RAILWAY  COMPANY  v.  HUDSON, 

This  case  was  argued  by  the  Solicitor  General  (Mr.  Bethell), 
Mr.  H.  Palmer,  and  Mr.  HoWwuse,  for  the  plaintiff.  By  Sir  Fitz 
Roy  Kelly,  Mr.  Holt,  Mr.  Toller,  and  Mr.  C.  H.  Grove,  for  the 
defendant. 

THE  MASTER  OF  THE  ROLLS.  The  York  and  North  Midland 
Railway  Company  had  been  incorporated  by  statute,  in  the  year 
183G.  From  the  time  of  its  original  formation,  the  defendant 
had  been  the  chairman  of  that  company,  and  it  is  the  common 
case  both  of  the  plaintiff  and  the  defendant,  that  he  possessed 
and  exerted  an  unusual  degree  of  influence  in  the  management 
of  the  company.  He  gave  orders  on  his  own  sole  authority  to 
the  servants  and  officers  of  the  company,  respecting  the  manage- 
ment of  it,  and  he  even  delegated  persons  to  give  orders  as 
coming  from  himself.  These  orders  seem  neven  to  have  been 
disputed,  and  he  exercised  an  uncontrolled  authority  in  the  con- 
duct of  every  part  of  the  concerns  of  the  company  ;  and  inas- 
much as  the  other  directors  seem  rarely  to  have  interfered,  or 
when  they  did,  to  have  acted  only  at  his  instance,  and  to  give 
effect  to  his  directions,  he  may,  in  some  sense,  be  said  to  have 
constituted  by  himself  the  board  of  directors  of  the  company.  It 
is  the  common  case  also  both  of  the  plaintiff  and  of  the  defend- 
ant, that  the  company  throve  much,  in  public  estimation  at 
least,  under  this  management,  and  it  was  generally  regarded, 
in  the  beginning  of  the  year  1846,  as  being  in  a  state  of  great 
prosperity. 

In  the  year  1845,  if  not  earlier,  a  project  had  been  enter- 
tained to  extend  the  operation  of  the  York  and  North  Midland 
Railway  Company,  by  the  formation  of  three  new  lines  of  rail- 
way— one  of  which  was  to  extend  from  York  to  Beverly,  a  sec- 
ond from  York  to  Leeds,  and  a  third  was  to  extend  the  Whitby 
and  Pickering  Railway  to  Castletown;  and  accordingly,  in  the 
month  of  January,  184G,  at  the  regular  half-yearly  general 
meeting  of  the  company,  held  on  the  IGth  of  that  month,  after 
the  annual  report  had  been  read  and  adopted,  the  defendant,  as 
chairman  of  the  company,  explained  the  projected  extension  to 
the  assembled  shareholders,  and  obtained  their  sanction  and  au- 
thority to  apply  to  Parliament  for  powers  to  make  these  addi- 
tional lines,  and  to  raise  the  capital  necessary  for  the  purposes 


IN  THE  ENGLISH  ROLLS  COURT.  61 

there  mentioned.  The  amount  of  capital  to  be  raised,  and  the 
way  in  which  it  was  to  be  apportioned,  were  publicly  explained 
to  the  meeting  by  the  defendant,  and  were  embodied  in  a  reso- 
lution passed  by  the  meeting,  which  I  shall  have  presently  to 
comment  upon.  The  plan  was  this :  an  additional  capital  of 
one  million  and  a  quarter  was  required ;  it  was  to  be  raised  by 
50,000  shares  at  .£25  each,  to  be  called  the  East  and  West 
Riding  Extension  Shares,  and  these  were  to  be  apportioned  in 
the  following  manner :  they  were  to  be  allotted  to  every  person 
holding  shares  in  the  York  and  North  Midland  Railway,  in  the 
proportion  of  one  extension  share  to  every  share  of  ,£50,  and 
one  extension  share  to  every  two  shares  of  <£25,  held  in  the 
York  and  North  Midland  Railway  Company.  This,  according 
to  the  number  of  such  original  shares,  would  exhaust  37,950  of 
the  extension  shares,  and  the  remainder,  amounting  to  12,050, 
were  to  be  left  at  the  disposal  of  the  directors.  The  resolution 
which  was  passed  is  distinct  in  its  terms  to  this  effect.  The 
relief  sought  in  this  cause  relates  to  the  proceeds  of  a  portion 
of  these  shares,  so  left  to  the  disposal  of  the  directors.  The 
acts  authorizing  these  extensions,  and  the  raising  of  the  capital 
necessary  for  this  purpose,  passed  in  the  session  of  184G  with 
much  difficulty,  as  the  defendant  alleges,  and  as  I  have  little 
doubt  correctly  alleges,  mainly  by  the  exertions  which  he  had 
made,  before  and  after  the  meeting  of  January,  1846,  to  obviate 
and  destroy  opposition.  The  37,950  shares,  subject  to  a  slight 
deduction  of  thirty  shares,  which  is  not  material  to  be  noticed, 
were  apportioned  among  the  shareholders  of  the  York  and  North 
Midland  Railway,  in  the  manner  provided  for  by  the  resolution, 
and  were  set  against  their  names  in  the  Share  Register  Book ; 
and  in  this  distribution  the  defendant's  is  placed,  not  in  the 
place  where  his  name  stands  in  the  alphabetical  list,  and  where 
the  shares  held  by  him  beneficially  were  placed,  but  at  the  end 
of  the  register,  after  the  name  of  the  last  shareholder  had  been 
entered  with  his  appropriate  number  of  shares.  The  directors, 
as  a  body,  have  not  sanctioned  any  disposal  of  these  shares, 
and  accordingly  no  minute  or  entry  is  to  be  found  in  the  record 
of  the  proceedings  of  the  directors  relating  to  them.  They 
seem,  however,  to  have  been  thus  disposed  of:  about  1,800 
were  applied  in  a  manner  which,  though  it  did  not  appear  to 


62         THE  YORK  ETC.  RAILWAY  COMPANY  v.  HUDSON, 

have  been  productive  of  benefit  to  the  company,  is  not  com- 
plained of;  4,991  still  remain  unappropriated;  and  it  is  with 
reference  to  the  remainder,  somewhat  exceeding  5,000  in  num- 
ber, that  this  bill  seeks  relief.  It  appears  that,  in  the  course 
of  the  months  of  October,  November,  and  December,  1846,  and 
throughout  the  whole  course  of  the  year  1847,  the  defendant 
caused  a  considerable  number  of  these  shares  to  be  issued  and 
transferred  into  the  names  of  various  persons,  who  were  his 
nominees,  and  that  he  caused  them  to  be  sold  by  brokers  on 
the  Stock  Exchange,  at  premiums  of  various  amounts,  varying 
from  .£10  to  <£1S  per  share.  I  do  not  consider  it  necessary,  for 
the  purpose  of  explaining  either  the  grounds  of  my  decision  or 
the  nature  of  the  decree  I  am  about  to  pronounce,  to  go  into 
the  details  of  these  various  transactions,  which  are  proved  with 
great  minuteness  by  various  witnesses.  I  think  -it  sufficient  to 
state  that  it  appears  to  me  to  be  established  by  evidence,  that 
upward  of  5,000  shares  were  so  disposed  of,  and  that  in  the 
great  majority  of  these  cases  it  is  proved  that  the  money  aris- 
ing from  the  sale  was  either  paid  to  the  account  of  the  defendant 
at  his  bankers,  or  by  his  order  and  according  to  his  direction. 
The  plaintiffs  admit  that  they  have  received  payment  of  all  the 
money  due  on  these  shares,  in  respect  of  the  deposit  and  calls ; 
but  they  contend  that  this  is  not  the  limit  of  their  rights,  and 
that  they  are  entitled  to  call  upon  the  defendant  to  pay,  to  the 
company,  the  profit  derived  by  him  on  the  sale  of  these  shares 
at  a  premium.  If  the  matter  rested  on  these  facts  alone,  con- 
sistently with  the  rules  of  equity,  daily  administered  by  this 
Court,  there  could  be  no  question  as  to  the  course  to  be  adopted 
and  the  decree  to  be  made.  If  these  shares  were  the  property 
of  the  defendant,  he  was  entitled  to  make  what  profit  he  could 
of  them  for  his  own  private  advantage.  If,  on  the  other  hand, 
they  were  the  property  of  the  company,  he  was  bound  to  account 
to  the  company  for  every  shilling  of  the  profit  derived  from  the 
sale  of  them.  To  determine  in  what  character  he  held  these 
shares,  it  is  necessary  to  recur  once  more  to  what  took  place  at 
the  meeting  in  January,  1846.  The  resolution  says  that  the 
12,050  shares  were  to  be  "at  the  disposal  of  the  directors;"  the 
defendant  contends  that  the  meaning  of  these  words,  unassisted 
by  the  observations  he  made  previous  to  the  adoption  of  the 


IN  THE  ENGLISH  ROLLS  COURT.  63 

resolution,  is  plain,  and  that  they  mean  that  the  directors  might 
do  what  they  pleased  with  these  shares,  and  that  the  meeting 
intended  to  give  them  to  the  directors,  for  their  own  use  and 
advantage ;  but  that  whether  this  were  so  or  not,  that,  at  least, 
it  was  intended  that  no  account  should  ever  be  required  as  to 
the  mode  in  which  the  directors  did  dispose  of  them ;  and  fur- 
ther, he  contends  that  it  was  well  known,  and  is  the  common 
case  of  the  plaintiffs  and  defendant,  that  he,  as  chairman,  did  in 
fact  constitute  the  whole  practical  board  of  direction  of  the 
company,  so  that  an  intention  to  put  these  shares  at  the  dis- 
posal of  the  directors  was,  in  truth,  an  intention  to  put  them  at 
the  disposal  of  himself,  the  chairman ;  that  this  was  so  under- 
stood by  every  one  present  at  the  meeting ;  and  that,  if  it  were 
not  manifest  on  the  face  of  the  resolution,  it  was  made  so  by  the 
observations  which  he  addressed  to  the  meeting  previous  to  its 
adoption.  If  this  be  once  established,  then  he  contends  that  all 
difficulty  ceases,  for  that  this  course  was  sanctioned  by  the  fourth 
section  of  the  Statute  of  9  Viet.  c.  66,  which  was  afterward 
passed  in  that  year,  and  which  enacted  that  these  shares  were 
to  be  distributed  in  such  manner  as  a  general  meeting  of  the 
company  should  have  directed,  or  might  thereafter  direct.  Upon 
the  construction  of  the  resolution,  unassisted  by  the  observations 
of  the  chairman,  I  have  not  come  to  the  conclusion  so  suggested: 
the  directors  are  persons  selected  to  manage  the  affairs  of  the 
company,  for  the  benefit  of  the  shareholders ;  it  is  an  office  of 
trust,  which,  if  they  undertake,  it  is  their  duty  to  perform  fully 
and  entirely.  A  resolution  by  shareholders,  therefore,  that 
shares  or  any  other  species  of  property  shall  be  at  the  disposal 
of  directors,  is  a  resolution  that  it  shall  be  at  the  disposal  of 
trustees ;  in  other  words,  that  the  persons  intrusted  with  that 
property  shall  dispose  of  it,  within  the  scope  of  the  functions 
delegated  to  them,  in  the  manner  best  suited  to  benefit  their 
cestuis  gue  trust.  To  construe  these  words  as  importing  a  gift 
to  the  directors  for  their  individual  advantage,  or  as  investing 
them  with  a  secret  and  irresponsible  trust,  would,  in  my  opinion, 
be  impossible,  unless  they  wrere  coupled  with  clear  and  unam- 
biguous expressions  to  that  effect.  In  the  absence  of  any  such 
expressions,  not  only  the  obligation  of  discharging  the  duty  lies 
on  the  persons  accepting  the  trust,  but  also  the  further  obligation 


64          THE  YORK  ETC.  RAILWAY  COMPANY  v.  HUDSON, 

of  accounting  for  their  discharge  of  it  to  their  cestuis  que  trust, 
whenever  required.  I  turn,  therefore,  to  the  observations  made 
by  the  defendant  at  this  meeting,  for  the  purpose  of  ascertaining 
whether  they  contained  such  an  intimation  of  the  purposes  for 
which  these  shares  were  left  at  the  disposal  of  the  directors  as 
the  defendant  contends  for;  and  in  doing  so,  I  assume  in  the 
defendant's  favor  (without  in  any  way  deciding  it),  that  the 
meaning  of  the  resolution  can  be.  varied  by  such  observations. 
Having  attentively  read  these  observations,  I  find  nothing  in 
them  to  shake,  but,  on  the  contrary,  much  to  confirm,  the  con- 
struction which  the  language  of  the  resolution  bears  when  taken 
alone.  The  expressions  relied  upon  are  these.  [His  honor  read 
the  first  and  second  resolutions.] 

If,  in  consequence  of  these  obsevations,  the  directors,  or  even 
the  defendant,  had  distributed  the  shares  in  question,  or  any 
portion  of  them,  to  the  land-owners  of  the  district  referred  to, 
or  to  such  other  persons  as  were  interested  in  that  district,  and 
who,  but  for  such  distribution,  would  have  offered  serious  oppo- 
sition to  the  passing  of  the  bill,  and  it  were  now  sought  to  make 
the  directors  liable  for  the  premiums  which  they  might  have  ob- 
tained by  the  sale  of  these  shares,  if  they  had  sold  them  instead 
of  so  distributing  them,  I  could  understand  the  force  of  the  ar- 
gument used  and  dilated  upon,  and  of  the  complaint  made  by 
the  counsel  for  the  defendant,  that  the  claim  of  the  plaintiffs 
was  inconsistent  with  good  faith.  But  of  the  5,000  shares,  the 
profits  arising  from  the  disposal  of  which  constitute  the  matter 
for  which  the  plaintiffs  require  the  defendant  to  account,  not  one 
is  shown  to  have  been  given  to  any  land-owner  or  to  any  other 
person  interested  in  the  district  referred  to,  with  the  exception 
of  the  defendant  himself.  To  contend,  in  the  face  of  these  ex- 
pressions, that  the  assembled  shareholders  must  have  understood 
and  meant,  by  their  resolution,  to  convey,  that  these  shares  were 
to  be  at  the  disposal  either  of  the  directors,  or  of  the  defendant 
(assuming  the  words  synonymous),  and  that  he  might,  if  he 
pleased,  put  in  his  own  pocket  the  whole  of  the  profit  to  be 
derived  from  them,  appears  to  me  incomprehensible.  It  is  ad- 
mitted that,  at  that  time,  it  was  well  known  that  the  scrip  when 
issued  would  bear  a  high  premium,  probably  upwards  of  .£10 
per  share.  If  the  shareholders  meant  what  is  contended  for  on 


IN  THE  ENGLISH  ROLLS  COURT.  65 

behalf  of  the  defendant,  they  must  have  meant  to  enable  the 
defendant  to  put  into  his  own  pocket  upwards  of  -£100,000,  of 
which  sum  they  might  have  had  the  benefit,  either  collectively 
or  individually ;  and  they  must  also  have  intended,  when  they 
did  this,  to  have  desired  to  relinquish  all  claim  to  the  grace  and 
liberality  of  making  a  gift  to  their  chairman  or  of  conferring  a 
favor  upon  him,  and  must,  therefore,  have  resolved  to  accom- 
plish it  in  a  secret  and  covert  manner,  without,  so  far  as  I  can 
perceive,  any  assignable  motive  for  so  doing.  I  have  looked  in 
vain  for  a  single  expression  to  show  that  the  defendant  sought 
to  derive,  or  that  he  intended  the  meeting  to  believe  that  he 
individually  was  to  derive,  the  slightest  advantage  from  these 
shares  being  placed  at  his  disposal.  It  is  true  that  he  was  a 
large  land-owner  on  the  line,  but  one  of  the  claims  urged  by 
liim  to  the  gratitude  of  the  company,  to  which  I  shall  presently 
have  to  advert,  is,  that  he  purchased  this  estate  with  a  view  of 
disarming  the  opposition  which  might  have  been  expected  had 
it  remained  in  the  possession  of  the  former  owner.  But,  in  the 
first  place,  there  is  no  evidence  to  induce  me  to  suppose  that 
the  Duke  of  Devonshire,  the  former  owner,  would  have  opposed 
this  bill  in  Parliament ;  and  secondly,  if  there  were,  it  is  plain, 
that  the  opposition  of  the  owner  was  not  disarmed,  but  made 
more  dangerous,  if  the  chairman  of  the  company  was  to  fill  the 
double  character  of  trustee  for  the  shareholders  on  the  one  hand, 
and  of  land-owner,  whose  opposition  was  to  be  bought  off,  on 
the  other.  In  my  opinion,  the  expressions  to  which  I  have  re- 
ferred, vague  and  indefinite  as  they  are,  at  the  best,  have  no 
meaning  when  addressed  to  a  body  of  the  shareholders,  unless 
they  are  understood  to  infer,  that  the  distribution  of  shares  was 
to  benefit  the  company,  by  the  conciliation  of  land-owners  and 
of  persons  interested  in  the  district  through  which  the  railway 
was  to  pass,  not  for  the  purpose  of  making  a  gratuity  to  them, 
at  the  mere  expense  of  the  company,  but  for  the  purpose  of 
benefiting  the  company,  by  applying  the  shares  in  order  to  re- 
move impediments  that  might  arise  by  the  opposition  of  persons 
of  that  description,  and  who  were  not,  from  their  position, 
bound,  as  the  defendant  was,  to  do  all  in  their  power  to  assist 
the  plan  of  the  company.  It  does  not,  in  my  opinion,  in  the 
slightest  degree,  shake  or  alter  the  conclusion  to  which  I  have 

5 


0(3  •   THE  YORK  ETC.  RAILWAY  COMPANY  v.  HUDSON, 

come  on  this  part  of  the  subject,  that,  in  1843,  a  large  number 
of  shares  were,  in  another  line  of  railway  from  York  to  Scar- 
borough (forming,  as  I  was  informed,  a  separate  company, 
though  connected  with  this),  put  expressly  at  the  disposal  of 
the  defendant,  who  was  the  chairman.  In  that  case,  two  of  the 
shareholders  objected  that  this  was,  in  truth,  putting  a  large 
sum  of  money  belonging  to  the  company,  amounting  to  many 
thousand  pounds,  into  the  pocket  of  Mr.  Hudson.  The  meeting 
discussed  that  question,  and  thought  that  Mr.  Hudson's  services 
had  been  such  that  he  deserved  that  gratuity,  and  accordingly 
decided  that  the  present  should  be  made  to  him,  which  was  ac- 
cordingly done.  Had  any  thing  of  a  similar  description  occurred 
at  the  meeting  in  January,  1846  ;  if  one  of  the  shareholders  had 
then  addressed  the  meeting,  and  said  that  "the  directors"  means 
"Mr.  Hudson,"  that  putting  12,050  shares  at  the-  disposal  of  the 
directors  is  putting  them  at  the  disposal  of  Mr.  Hudson ;  that  the 
shares  will  certainly  be,  on  the  issue  of  the  scrip,  at  a  premium  of 
not  less  than  ,£10  per  share,  and  that  this  is,  in  fact,  a  resolution 
putting  ,£120,500  in  the  pocket  of  Mr.  Hudson;  if  any  share- 
holder had  made  such  observations  as  these  to  the  meeting,  and 
if  that  purpose  had  been  avowed  by  Mr.  Hudson  to  the  meeting 
in  January,  184G,  as  it  had  been  at  the  meeting  of  the  share- 
holders of  the  Scarborough  branch  in  1843;  and  if,  after  all  this, 
the  meeting  had  determined  to  make  that  present  or  gratuity  to 
Mr.  Hudson,  in  consideration  of  his  services  to  the  company, — 
then  would  have  arisen,  in  this  case,  the  ulterior  question,  which 
seems  never  to  have  been  mooted,  in  1843,  and  which,  in  my 
opinion,  it  is  not  necessary  here  to  decide,  viz.,  the  question 
whether  a  public  meeting  of  shareholders  has  the  power,  within 
the  scope  of  the  Act  of  Parliament  and  the  partnership  thereby 
created  and  incorporated,  to  bind  absent  persons,  or  even  a  mi- 
nority, in  thus  disposing  of  the  funds  of  the  company.  That 
question  does  not,  in  my  opinion,  arise  in  the  present  case;  but 
I  am  anxious  that  nothing  should  fall  from  me  to  lead  to  the 
conclusion  that  this  Court,  consistently  with  the  principles  which 
it  administers,  could  sanction  such  a  proceeding.  The  duties 
and  powers  of  the  directors  and  shareholders  are  defined,  with 
reasonable  accuracy,  in  the  statutes  applicable  to  this  subject; 
and  the  proper  and  becoming  mode  of  proceeding  in  the  case 


IN  THE  ENGLISH  ROLLS  COURT.  67 

of  services  as  great  as  can  be  conceived,  and  as  are  here  said 
to  have  been  performed  by  Mr.  Hudson,  is  that  the  individual 
shareholders  should,  from  their  private  funds  or  shares,  con- 
tribute such  sums  of  money,  or  give  such  shares,  as  each  may 
think  fit  toward  creating  a  gratuity -to  reward  such  persons. 

But  then  it  is  contended,  on  the  part  of  Mr.  Hudson,  that 
the  premiums  on  these  shai'es  formed  no  part  of  the  property  of 
the  company ;  that  the  capital  was  fixed  by  the  statute,  and 
could  not  be  increased;  that  the  capital  was  one  million  and  a 
quarter,  and  no  more ;  and  that  if  these  shares  were  allot- 
ted, and  the  deposit  and  calls  paid  upon  them,  it  was  no  con- 
cern of  the  company  by  whom  they  were  paid,  and  that  the 
capital  of  the  company  would  remain  the  same.  I  have  not 
come  to  that  conclusion.  I  think  it  immaterial  to  consider, 
whether  the  profits  derived  from  the  disposal  of  the  12,050 
shares  ought  to  be  treated  as  capital  or  income.  The  statute 
expressly  states,  that  the  shares  shall  be  distributed  in  such  a 
manner  as  a  general  meeting  shall  have  directed  or  shall  direct ; 
and  if  the  general  meeting  had  converted  this  profit  into  cap- 
ital, or  if  they  had  divided  it  among  themselves,  as  part  of  the 
profits,  they  had,  under  the  act,  the  power  to  do  so.  The  act 
therefore  has  sanctined  the  resolution ;  and,  in  my  opinion,  the 
fair  construction  of  the  resolution  was  this :  the  shares  are  left 
to  be  disposed  of  by  the  directors,  according  to  their  judgment 
and  discretion,  as  they  may  consider  best  for  the  interest  of  the 
company ;  that  is,  for  the  interest  of  the  shareholders  of  the 
company.  The  directors  were  not,  I  think,  intended  to  be  made 
liable,  in  case,  through  an  error  of  judgment,  they  had  disposed 
of  some  of  the  shares  in  a  manner  which  ultimately  turned  out 
not  beneficial  to  the  company,  although  it  seemed  to  be  so  when 
they  parted  with  them.  They  were  not,  I  think,  intended  to  be 
made  liable,  in  case  they  had,  through  an  error  of  judgment, 
omitted  to  realize  advantages  from  them  which  might  have  been 
obtained;  but  they  were,  in  my  opinion,  bound  to  be  ready,  at 
all  times,  to  explain  their  conduct  in  this  matter  to  the  share- 
holders, and,  above  all,  on  no  principle  could  they  derive  to 
themselves  directly  or  indirectly  any  personal  or  pecuniary  ad- 
vantage from  the  mode  in  which  they  might  dispose  of  these 
shares.  This  is,  in  my  opinion,  the  fair  construction  of  the 


68         THE  YORK  ETC.  RAILWAY  COMPANY  v.  HUDSON, 

resolution,  and  it  is  the  only  one  which  is  consistent  with  equity 
and  the  principles  on  which  this  Court  acts  in  matters  of  trust. 
Such  also  appears  to  have  been  the  construction  which  the 
plaintiffs  have  put  on  it,  for  no  complaint  is  made  in  respect  of 
shares  to  the  number  of  1,800,  forming  part  of  the  12,050 
shares,  which  seem  to  have  been  disposed  of  in  a  manner 
which,  whether  beneficial  or  not  to  the  company,  has  not  pro- 
duced, and  was  not  intended  to  produce,  any  personal  or  pecu- 
niary advantage  to  the  defendant,  or  to  any  of  the  directors. 

The  defense  I  have  hitherto  been  considering  affects  the 
whole  relief  sought  by  the  plaintiffs,  and  their  title  to  require 
an  account  of  any  thing ;  but  if  the  defendant  fails,  as  in  my 
opinion  he  does,  in  establishing  it,  he  then  sets  up  a  separate 
defense,  applicable,  in  detail,  to  different  portions  of  the  shares 
disposed  of  by  him.  In  the  first  place,  he  say-s,  that  though 
the  argument  urged  on  his  behalf,  which  I  have  hitherto  been 
considering,  would  apply  in  terms  to  the  whole  number  of  5,000 
shares  disposed  of  by  him,  he  does  not  seek  to  retain  the  profit 
on  all  these  shares  for  his  own  advantage.  The  way  in  which 
the  case  is  put  by  him,  or  by  his  counsel,  is  this :  the  number 
of  shares,  the  misapplication  of  which  is  complained  of  by  the 
bill,  is  5,105;  2,300  of  these  the  defendant  says  he  sold  for  the 
benefit  of  the  company ;  and  though,  as  he  contends,  he  might 
claim  for  himself  the  benefit  derived  from  them,  that  he  does' 
not  seek  to  do  so,  but  says  that  he  is,  and  always  has  been, 
content  that  the  company  should  have  the  profit  derived  from 
them ;  and  as  evidence  of  this,  he  refers  to  the  fact  that  on  the 
16th  of  July,  1848,  he  paid  ^16,000  to  the  credit  of  the  com- 
pany, which  is,  what  he  calculates  to  have  been,  the  profit  de- 
rived from  the  sale  of  these  2,300  shares.  The  remaining 
number  of  shares  he  thus  disposes  of:  1,105  shares  were,  he 
says,  applied  to  the  use  of  various  persons  whose  names  he  does 
not  mention,  in  order  to  secure  or  reward  services  which  he  re- 
fuses to  stale.  The  remainder,  consisting  of  1,700  shares,  he 
admits  he  applied  for  his  own  use ;  and  he  justifies,  and  insists  on 
liis  right  so  to  do,  as  being  only  a  just  and  barely  an  adequate 
reward  for  the  services  rendered  by  him  to  the  company.  With 
respect  to  the  2,300,  it  is  plain,  even  if  the  observations  I  have 
already  made  did  not  apply,  that  he  has  submitted  to  an  account, 


IN  THE  ENGLISH  ROLLS  COURT.  69 

and  that  he  must  account  accordingly,  and  that  in  taking  such 
account,  he  must  be  allowed  the  .£16,000  he  has  paid,  in  that 
respect,  together  with  all  just  allowances.  With  respect  to  the 
1,105,  it  is  insinuated  in  the  pleadings,  and  openly  asserted  at 
the  bar,  that  some  secret-service  money  of  this  description  is 
essential,  for  the  purpose  of  enabling  the  promoters  of  a  bill  to 
pass  it  through  Parliament,  and  that  the  services  performed, 
and  the  persons  rewarded  for  the  performance  of  them,  must, 
necessarily  and  as  an  indisputable  condition,  be  kept  concealed ; 
and  this  was  pushed  so  far  as  to  say,  that  various  persons  who 
would  be  too  high-minded  to  take  a  bribe,  in  the  shape  of 
money,  for  assistance  to  be  rendered  in  Parliament,  would  not 
scruple  to  accept,  at  par,  shares,  capable  of  being  sold  in  the 
market  at  a  premium,  as  a  remuneration  for  the  same  services. 
Whether  this  be  true  or  not,  I  am  unable  to  state.  I  can  only 
state,  that  having  had  some  experience  in  Parliament,  I  do  not 
believe  that  an  attempt  to  resort  to  any  such  means  is  necessary 
or  useful,  for  the  purpose  of  furthering  the  progress  of  a  bill  in 
Parliament.  I  am  sure  that,  if  practicable,  it  is  a  highly  im- 
proper application  of  money  or  shares,  and  that  this  Court  will 
not  attend  to  the  suggestion  of  such  a  mode  of  application  as  an 
excuse  for  not  rendering  an  account. 

If  the  defendant  has  applied  the  property  of  the  company  in 
a  manner  which  will  not  bear  the  light,  and  for  purposes  which 
can  not,  with  propriety,  be  stated  even  to  the  shareholders  of 
the  company,  and  which  purposes  have  not  been  distinctly  sanc- 
tioned by  them,  the  defendant  must  bear  the  consequences ;  and 
if  he  be  charged  with  the  receipt  of  the  money,  he  can  not  dis- 
charge himself  by  suggestions  of  any  such  application  of  any 
portion  of  it. 

With  regard  to  the  remaining  number  of  1,700  shares,  the 
defendant  avows  that  he  has  applied  them  to  his  own  use ;  and  it 
is  contended  by  him,  and  by  his  counsel  on  his  behalf,  that,  re- 
gard being  had  to  the  services  he  had  performed,  and  the  scanty 
nature  of  the  salary  he  received  as  chairman,  the  remuneration 
to  which  he  thus  helped  himself  was  but  a  meager  and  inade- 
quate return  for  the  advantages  he  had  conferred  upon  the  com- 
pany. If  this  plea  were  admissible  at  all,  it  would  be  incumbent- 
on  me  to  go  through,  in  detail,  the  services  rendered  by  the 


70    THE  YORK  ETC.  RAILWAY  COMPANY  v.  HUDSON, 

defendant,  and  having  done  this,  then  to  inquire  what  benefits, 
in  the  shape  of  remuneration,  the  defendant  had  received  for 
these  services,  which  would  necessarily  include  any  cases,  if  any 
existed,  of  voluntary  remuneration  by  the  shareholders,  in  their 
individual  character,  such  as  that  which  occurred  in  the  Scar- 
borough branch,  to  which  the  defendant  has  pointedly  called  my 
attention.  But,  in  truth,  the  plea  is  wholly  inadmissable.  When 
Mr.  Hudson  accepted  the  office  of  chairman,  he  knew  that  the 
salary  was  not  more  than  ,£1  per  week,  and  yet  he  was  content 
to  give  his  services  on  that  footing.  He  might  possibly  have 
considered,  that  the  station  and  influence  acquired  in  the  posi- 
tion of  chairman  of  the  York  and  North  Midland  Railway  was 
a  remuneration  for  the  time  and  labor  bestowed  by  him,  even  if 
his  services  were  not  paid  by  any  salary  at  all ;  but  whether 
this  were  so  or  not,  it  is  the  duty  of  every  man  who  accepts  any 
situation  to  perform  the  duties  of  it  thoroughly  and  entirely. 
If  they  require  his  whole  time  and  attention,  it  is  his  duty  to 
give  that  whole  time  and  attention  to  the  due  discharge  of  them. 
This  Court  can  never  countenance  a  person  who  is  placed  in  a 
fiduciary  situation  in  retaining,  for  his  own  benefit,  sums  of 
money  which  have  come  to  his  hands,  or  have  been  acquired 
by  him  in  that  character,  although  the  acquisition  of  those  sums 
is  due  to  his  own  exertions,  on  the  suggestion  that  his  services 
were  worth  more  than  what  was  paid  for  them,  and  that  he  was 
himself  entitled  to  ascertain  and  determine  the  just,  measure  of 
their  value.  If  this  principle  were  alloAved,  I  know  not  what 
there  would  be  to  prevent  any  clerk  from  retaining  the  property 
of  his  master,  on  the  plea  that  his  master  had  not  adequately 
rewarded  bis  great  and  meritorious  services. 

If  all  these  defenses  fail,  then  another  head  of  defense  is 
brought  forward,  which  is,  that  of  acquiescence  by  the  plaintiffs. 
It  is  contended,  that  they  knew  and  did  not  complain  of  the  ap- 
propriation of  shares  for  many  years,  and  that,  consequently, 
they  must  be  taken  to  have  assented  to  it.  The  facts  which  are 
said  to  amount  to  acquiescence  are  those  to  which  I  have  al- 
ready shortly  adverted,  and  which  are  as  follows:  the  Share 
Register  Books  were  produced  to  the  general  half-yearly  meet- 
ings in  January  and  July,  1847,  and  in  January  and  July,  1848. 
In  all  of  them,  the  list  of  the  shareholders  is  continued  down  to 


IN  THE  ENGLISH  ROLLS  COURT.  71 

and  including  the  letter  Z.  After  this  there  appears,  in  the 
book  which  was  produced  at  the  general  meeting  in  January, 
1847,  an  entry  of  9,610  shares,  in  the  name  of  Mr.  Hudson.  At 
the  close  of  the  list,  in  the  book  produced  in  July,  1847,  a  sim- 
ilar entry  appears  in  the  same  place,  but  the  number  of  shares 
is  reduced  to  8,591 ;  in  January,  1848,  a  similar  entry  of  5,141 
shares;  and  in  July,  1848,  a  similar  entry  of  4,991  shares, 
which  is  the  remainder  of  the  12,050  shares,  which,  as  I  have 
already  stated,  remained  unappropriated  at  the  time  when  Mr. 
Hudson  ceased  to  be  a  director  of  the  company.  These  entries 
were  open  to  the  inspection  of  all  the  shareholders  present  at 
those  meetings.  They  must  therefore,  it  is  said,  be  considered 
to  have  read  them,  and  thereby  to  have  become  cognizant  of 
the  fact  that  the  shares  were  allotted  to  Mr.  Hudson ;  and  as 
they  have  taken  no  step  in  consequence,  they  must  be  considered 
to  have  acquiesced  in  this  appropriation,  and  therefore  they  can 
not  now  disturb  or  complain  of  it.  I  abstain  from  considering 
whether  any  acquiescence  to  bind  a  company  could  be  inferred, 
in  the  absence  of  any  positive  act  of  that  character,  from  the 
circumstance  that  any  individual  shareholder  might  have  seen 
such  an  entry,  on  four  successive  half-yearly  occasions,  the  first 
of  which  is  less  than  three  years  before  the  bill  was  filed ;  be- 
cause 1  think  it  obvious  that  these  entries  have  not  the  effect 
contended  for.  The  place  and  manner  of  the  entry  show, 
clearly,  that  these  were  the  unappropriated  shares  which  were 
to  be  at  the  disposal  of  the  directors ;  if  they  had  been  appro- 
priated to  Mr.  Hudson,  they  would  have  appeared  attached  to 
his  name,  in  the  list,  in  its  regular  and  alphabetical  place ;  and 
so  far  was  it  from  being  considered  that  this  was  an  appropria- 
tion of  these  shares  to  Mr.  Hudson,  it  is  the  common  case  both 
of  the  plaintiffs  and  of  the  defendant,  that  the  last  entry  of 
4,991  describes  the  shares  remaining  at  the  disposal  of  the  di- 
rectors, and  which  had  never  been  appropriated  by  them,  either 
to  Mr.  Hudson  or  to  any  other  person.  If  the  first  entry  be 
good,  to  show  that  9,610  shares  had  been  appropriated  to  Mr. 
Hudson,  then  the  last  entry  is  equally  good,  to  show  that  the 
4,991  shares  were  appropriated  to  Mr.  Hudson,  in  which  case  he 
would  have  been  liable  to  pay  the  deposit  and  the  calls,  which 
would,  in  that  event,  have  accrued  due  on  such  shares,  and  all 


7-7 


THE  YORK  ETC.  RAILWAY  COMPANY  v.  HUDSON, 


which  would  be  now  due  from  him ;  but  no  such  deposit  or  call 
has  ever  been  paid  or  demanded,  nor  has  any  dividend  ever 
been  declared  on  these  shares ;  they  are,  in  truth,  plainly  the 
Balance  of  the  12,050  shares  unappropriated  by  the  company, 
and  which  were  entered  in  the  name  of  the  chairman  of  the 
company,  at  the  conclusion  of  the  share-list,  in  order  so  to  des- 
ignate them.  Whether  this  was  the  correct  form  of  entry,  or 
whether  the  more  proper  form  would  not  have  been,  to  have 
entered  the  shares  to  the  directors  of  the  company,  it  is  not,  in 
my  opinion,  for  the  purposes  of  this  suit,  material  to  inquire.  I 
am  of  opinion,  therefore,  that  so  far  as  regards  the  East  and 
West  Riding  Extension  shares  the  defenses  set  up  by  the  de- 
fendant fail,  and  that  he  must  account  to  the  plaintiffs  for  the 
profits  derived  by  him  from  his  disposal  of  these  shares  (a). 

I  have  now  to  consider  the  case  of  the  Hull  and  Selby  Rail- 
way Shares  on  this  subject.  The  facts  appear  to  be  these :  In 
July,  184G,  an  act  was  passed,  which  authorized  the  York  and 
North  Midland  Railway  Company  to  purchase  the  Hull  and  Selby 
Railway,  and  also  to  raise  the  additional  capital  necessary  for 
this  purpose,  not  exceeding  .£2,000,000,  by  the  creation  of  new 
shares,  according  to  the  directions  of  any  past  or  future  general 

(a)  See  note  preceding,  page  88.     Also  note  to  Baker  v.  Whiting,  hereinafter. 

Acquiescence  for  years,  by  stockholders,  in  appropriating  funds  to  carry  out 
schemes  beyond  the  powers  of  the  corporation,  will  not  legalize  ihe  act.  Coleman 
\.  Eastern  Counties  R.  R.  Co.,  4  Eng.  Railway  Cases,  513. 

Prideux  v.  Lontdale,  11  Weekly  Reporter  (1862-3),  531,  before  Vice-Chancellor 
STEWART  (1863),  532:  "Acquiescence,  without  full  and  sufficient  knowledge  of 
the  real  nature  and  effect  of  the  instrument,  can  be  of  no  avail."  Appealed  and 
confirmed  by  the  Lords  Justices,  Ib.  705  (May,  18G3),  except  as  to  allowing  a 
a  party  defendant  his  costs:  "Delay  in  instituting  proceedings,  where  the  par- 
ties are  members  of  the  same  family,  not  so  strictly  regarded  as  where  they  are 
strangers  to  each  other." 

Gatty  v.  Phillipson,  7  Hare,  516,  27  Eng.  Ch.:  '"A  cestui  que  trust  discovering  a 
breach  of  trust,  but  not  receiving  any  benefit  from  it,  or  conniving  in  it  for  nny 
purpose,  and  not  recogniiing  the  transaction,  is  not  precluded  from  complaining 
of  it  merely  on  the  ground  that  he  abstained  from  making  that  complaint  until 
long  after  he  first  knew  it."  This  knowledge  existed  for  over  six  years.  10 
England  the  old  rule  of  actions  on  the  case  still  prevails,  and  are  barred  in  six 
years  by  21  Jac.  1,  ch.  16,  sec.  3;  8  Fisher's  Harrison's  Dig.  5478. 

Minding  acquiescence  is  in  the  nature  of  an  estoppel  in  pain.  Pearce  v.  Mad. 
and  Ind.  R.  R.  Co.,  21  Howard,  441 ;  Zabrietkie  v.  Cleveland,  Col.  and  Cin.R.  R.  Co., 
23  Howard,  381  ;  Sparkt  v.  Shropshire,  4  Bush's  Ky.  552. 


IN  THE  ENGLISH  ROLLS  COURT.  73 

meeting,  specially  convened  for  this  purpose.  In  October,  1846, 
the  York  and  North  Midland  Railway  Company,  at  a  meeting 
specially  convened  for  this  purpose,  came  to  a  resolution  to 
purchase  the  Hull  and  Selby  Railway,  and  to  raise  the  capital 
necessary,  by  the  creation  of  62,950  shares,  which  were  to  be 
issued  in  the  following  manner :  each  shareholder  of  the  York 
and  North  Midland  Railway  Company  was  entitled,  if  he  pleased, 
to  take  one  of  these  shares  for  every  share  of  =£50,  or  any  two 
shares  of  <£25  each,  held  by  him  in  the  York  and  North  Mid- 
land Railway  Company,  The  number  of  shares  in  the  Hull  and 
Selby  Railway  required  for  this  purpose,  if  every  shareholder 
took  the  full  number  of  shares  he  was  entitled  to,  was  58,014, 
leaving  a  balance  of  4,936  unappropriated  in  the  hands  of  the 
company.  I  have  not  ascertained  the  exact  accuracy  of  these 
numbers,  nor  is  it  material  for  the  purposes  of  my  present  deci- 
sion. The  bill  complains,  that  many  of  these  shares  were  sold 
by  the  defendant,  for  his  own  purposes ;  and  according  to  the 
evidence  it  appears,  that  1,912-2-  shares  were,  from  time  to  time, 
allotted  to  various  persons  who  were  mere  nominees  of  the  de- 
fendant, and  were  sold  by  brokers  in  the  market  for  various  sums, 
but  always  at  a  premium,  and  that  the  produce  has  been  paid  to 
the  account  of  the  defendant  at  his  banker's,  or  applied  according 
to  his  direction.  The  question  is,  whether  the  defendant  is 
bound  to  account  to  the  company  for  the  profit  thus  realized  by 
him.  After  the  observations  I  have  made  respecting  the  East 
and  West  Riding  Extension  Shares,  very  little  need  be  said  to 
explain  my  decision  with  reference  to  the  Hull  and  Selby. 

The  question  is  governed  by  the  principles  I  have  already 
stated  to  be  applicable  to  the  transaction  relative  to  the  disposal 
of  the  East  and  West  Riding  Extension  Shares.  In  truth,  if 
what  took  place  at  the  meeting  in  January,  1846,  and  the  reso- 
lution then  passed  by  the  meeting,  could  be  considered  as  any 
justification  for  the  course  adopted  by  the  defendant  with  refer 
ence  to  the  East  and  West  Riding  Extension  Shares,  that  justi- 
fication is  wanting,  so  far  as  regards  the  Hull  and  Selby  Shares. 
There  was  no  resolution  of  any  general  meeting  respecting  these 
unappropriated  shares.  There  was  no  observation  made  at  any 
general  meeting  by  the  chairman,  or  by  any  of  the  directors, 
concerning  them.  They  were  simply  unappropriated  shares  in 


74         THE  YORK  ETC.  RAILWAY  COMPANY  v.  HUDSON, 

the  hands  of  the  company,  which  the  defendant  caused  to  be 
appropriated  to  whomsoever  he  pleased,  when  he  pleased,  and 
sold  for  his  own  advantage  as  he  pleased.  In  fact,  the  defense 
of  the  conduct  of  the  defendant,  relative  to  the  Hull  and  Selby 
Shares,  has  been  but  slightly  insisted  on  by  the  defendant's 
counsel.  All  that  has  been  urged,  on  that  head,  is  reducible  to 
this  argument,  viz.,  the  defendant  was,  for  the  reasons  already 
urged,  entitled  to  be  considered  as  the  allottee  of  the  extension 
shares,  the  disposal  of  which  is  complained  of  by  the  plaintiffs, 
and  being  so  entitled,  then  these  shares  in  the  Hull  and  Selby 
Railway  are  no  more  than  the  number  properly  allotted  to  him 
in  respect  of  these  East  and  West  Riding  Extension  Shares, 
which  formed  part  of  the  general  stock  and  capital  of  the  York 
and  North  Midland  Railway  Company.  Assuming  this  argument 
to  be  correct,  the  determination  of  this  question  piust  depend  on 
the  decision  to  which  the  Court  may  have  come  with  regard  to 
the  former  shares.  Even  if  I  were  to  accede  to  that  view  of  the 
case,  it  is  obvious  that,  if  my  former  decision  be  correct,  the  de- 
fendant can  in  no  respect  be  considered  as  the  allottee  of  the 
extension  shares  disposed  of  by  him,  but  that  he  must,  with  ref- 
erence to  them,  be  considered  in  the  light  of  the  servant  of  the 
company,  who  has  taken  advantage  of  his  situation  to  dispose, 
for  his  own  benefit,  of  property  of  the  company  intrusted  to  him 
for  different  purposes,  and  for  which  he  must  be  made  to  ac- 
count. And  it  follows,  of  necessity,  from  the  same  principles 
and  upon  the  same  grounds,  which  I  have  already  expressed 
with  reference  to  them,  that  he  must  be  compelled  to  account 
for  the  profits  derived  by  him  from  the  sale  of  the  Hull  and 
Selby  shares  remaining  unappropriated  in  the  hands  of  the 
company. 

The  result  therefore  is,  that,  in  my  opinion,  the  plaintiffs 
are  entitled  to  relief,  in  this  suit,  on  both  branches  of  complaint, 
and  that  a  decree  must  be  made  to  this  effect :  Declare  that  the 
defendant  is  a  trustee  for  the  York  and  North  Midland  Railway 
Company,  of  the  shares  in  the  East  and  West  Riding  Extension 
Railways,  and  in  the  Hull  and  Selby  Railway,  disposed  of  by 
him,  or  by  his  order,  in  his  character  of  chairman  or  director 
of  the  said  company. 


IN  THE  ENGLISH  ROLLS  COURT. 


Declare  that  the  defendant  is  bound  to  account  to  the  plaint- 
iffs for  all  profits  derived  from  the  sale  and  disposal  of  such 
shares  respectively. 

Take  an  account  of  all  the  moneys  produced  by  or  arising 
from  the  sales  of  all  the  East  and  West  Riding  Extension 
Shares,  and  Hull  and  Selby  Railway  Shares,  respectively,  dis-. 
posed  of  by  the  defendant,  or  by  his  order,  or  for  his  use ;  and 
in  taking  such  account,  the  defendant  is  to  be  charged  with  in- 
terest, at  5  per  cent,  on  the  sums  so  received  by  or  paid  to 
him,  or  to  his  order,  or  for  his  use,  from  the  time  when  the 
same  and  every  part  thereof  were  and  was  received  and  paid 
respectively.  And  in  taking  such  account,  the  defendant  is  to 
have  credit  for  all  sums  paid  by  him  to  or  for  the  use  of  the 
company,  in  respect  of  such  shares  respectively.  And  he  is  also 
to  have  all  just  allowances. 

Subject  to  any  observations  from  counsel  as  to  the  mode  of 
carrying  the  views  I  have  expressed  into  effect,  I  am  of  opinion 
that  this  is  the  best  form  of  the  decree.  I  must  give  interest 
at  5  per  cent  against  the  defendant,  because,  if  my  decision  be 
correct,  he  is  a  trustee  who  has  been  deriving  profit  from  the 
property  of  his  ceshds  que  trust.  The  form  also  in  which  I 
have  directed  the  account,  will  render  it  unnecessary  to  give 
any  special  directions  as  to  the  interest  on  calls,  due  in  respect 
of  these  shares  disposed  of  by  the  defendant,  but  which  calls 
were  left  unpaid  for  some  period  of  time  after  they  had  become 
due.  I  am  also  of  opinion,  that  I  can  not  charge  the  defendant 
with  the  value  in  the  market  of  any  shares,  at  the  time  of  the 
issue,  which  shall  not  appear  to  Have  been  actually  sold.  If,  on 
taking  the  account,  it  should  appear  that  shares  have  been  actu- 
ally sold  for  the  defendant,  but  the  exact  time  when,  and  the 
price  for  which,  they  were  sold,  can  not  be  ascertained,  in  such 
case  it  will  be  proper  to  fix  the  defendant  with  the  average 
price  which  the  shares  bore  during  the  period  within  which  the 
sale  is  ascertained  to  have  taken  place. 

As  the  expense  of  this  suit,  up  to  this  point,  has  been  prin- 
cipally occasioned  by  the  defendant  resisting  his  liability  to  ac- 
count, he  must  pay  the  costs  of  the  suit,  up  to  and  including  the 
hearing,  but  the  costs  of  the  rest  of  the  suit  will  depend  upon 
the  result  of  the  account. 


76 -ABERDEEN  RAILWAY  COMPANY  v.  BLAIKIE  BROS., 


ABERDEEN  RAILWAY  COMPANY  v.  BLAIKIE  BROTHERS. 

[Tin's  -was  a  Scotch  case,  decided  by  the  House  of  Lords  in  1854,  the  Lord 
Chancellor  CRANWORTH  delivering  the  opinion,  and  Lord  BROUGHAM  con- 
curring. Reported  in  I  M'Queen,  461.] 

The  director  of  a  railroad  company  is  a  trustee;  and,  as  such,  is  precluded  from 
dealing,  on  behalf  of  the  company,  with  himself,  or  with  a  firm  of  which  he 
is  a  partner. 

It  is  a  rule  of  universal  application,  that  no  trustee  shall  be  allowed  to  enter 
into  engagements  in  which  he  has,  or  can  have,  a  personal  interest,  conflict- 
ing, or  which  may  possibly  conflict,  with  the  interest  of  those  whom  he  is 
bound  by  fiduciary  duty  to  protect. 

So  strictly  is  this  principle  adhered  to,  that  no  question  is  allowed  to  be  raised 
as  to  the  fairness  or  unfairness  of  the  question;  for  it  is  enough  that  the 
parties  interested  object. 

It  may  be  that  the  terms  on  which  a  trustee  has  attempted  to  deal  with  the  trust 
estate  are  as  good  as  could  have  been  obtained  from  any  other  quarter.  They 
may  even  be  better.  But  so  inflexible  is  the  rule,  that  no  inquiry  into  that 
matter  is  permitted. 

It  makes  no  difference  whether  the  contract  relates  to  real  estate,  or  personality, 
or  mercantile  transactions ;  the  disability  arising,  not  from  the  subject- 
matter  of  the  contract,  but  from  the  fiduciary  character  of  the  contracting 
party. 

The  law  of  Scotland  and  the  law  of  England  are  the  same  upon  these  points; 
both  coming  from  the  Roman  Law,  itself  bottomed  in  the  plainest  maxims 
of  good  sense  and  equity. 

The  rules  which  govern  fiduciary  relations  are  equitable  rules,  unknown  to  the 
English  courts  of  common  law.  Consequently,  in  a  case  properly  determi- 
nable  by  those  equitable  rules,  the  decision  of  a  court  of  common  law,  when 
opposed  to  them,  must  bedisregarded. 

The  great  case  of  the  York  Buildings  Company  v.  Mackenzie,  decided  by  the  House, 
in  1 795,  under  the  advice  of  Lord  THURLOW  and  Lord  LOUGHBOROUGH,  com- 
mented on  and  expounded. 

THE  action  was  by  the  Messrs.  Blaikie,  iron-founders  in 
Aberdeen,  against  the  railway  company,  for  performance  of  a 
contract  whereby  the  company  had  agreed  to  purchase  and  ac- 
'cept  from  Messrs.  Blaikie  certain  iron  chairs,  which  they  were 
to  manufacture  for  the  company,  at  the  rate  of  .£8  per  100,  per 
ton.  The  summons  concluded  for  implement  of  the  contract,  or 
for  damages. 

The  principal  defense  was,  that  Thomas  Blaikie,  the  man- 
aging partner  of  the  partners,  was  at  the  time  of  the  contract  a 


IN  THE  HOUSE  OF  LORDS.  77 

director,  and  indeed  chairman,  of  the  railway  company,  and  so 
incapacitated  from  dealing  in  that  character  with  his  own  firm. 
The  Court  of  Session  held  that  the  Companies'  Clauses  Con- 
solidation Act  did  not  nullify  the  contract,  although  under  it  the 
contractor  ceased  to  be  a  director.  They,  therefore,  decided  in 
favor  of  the  pursuers.  Hence  this  appeal. 

The  Solicitor  General  and  Mr.  Gordon  appeared  for  the 
appellant  or  plaintiff.  Messrs.  Holt  and  Macfarlane,  for  tire 
respondents. 

THE  LORD  CHANCELLOR  CRANWORTH'S  OPINION. 

[It  appears  that,  of  the  chairs,  2,710  tons  were  delivered, 
and  1,440  tons  remained  to  be  supplied,  under  the  contract,  but 
which  the  company  refused  to  accept.  The  prayer  was  that  the 
company  should  be  required  to  accept  the  balance,  and  pay 
therefor  the  stipulated  price  of  <£S  per  100,  per  ton.] 

This,  therefore,  brings  us  to  the  general  question,  whether  a 
director  of  a  railway  company  is  or  is  not  precluded  from  deal- 
ing on  behalf  of  the  company  with  himself,  or  with  a  firm  in 
which  he  is  a  partner. 

A  corporate  body  can  act  only  by  agents,  and  it  is  the  duty 
of  those  agents  so  to  act  as  best  to  promote  the  interest  of  the 
company  whose  affairs  they  are  conducting.  Such  agents  have 
duties  to  discharge  of  a  fiduciary  nature  toward  their  principal. 
And  it  is  a  rule  of  universal  application,  that  no  one,  having 
such  duties  to  discharge,  shall  be  allowed  to  enter  into  engage- 
ments in  which  he  has,  or  can  have,  a  personal  interest  conflict- 
ing, or  which  may  possibly  conflict,  with  the  interest  of  those 
whom  he  is  bound  to  protect.  So  strictly  is  this  principle  ad- 
hered to,  that  no  question  is  allowed  to  be  raised  as  to  the  fair- 
ness or  unfairness  of  a  contract  so  entered  into. 

It  obviously  is,  or  may  be,  impossible  to  demonstrate  how 
far,  in  any  particular  case,  the  terms  of  such  a  contract  have 
been  the  best  for  the  interest  of  the  cestui  qne  trust  which  it  was 
possible  to  obtain.  It  may  sometimes  happen  that  the  terms  on 
which  a  trustee  has  dealt,  or  attempted  to" deal,  with  the  estate 
or  interests  of  those  for  whom  he  is  a  trustee,  have  been  as  good 
as  could  have  been  obtained  from  any  other  person ;  they  may 


78         ABERDEEN  RAILWAY  COMPANY  v.  BLAIKIE  BROS., 

even  at  the  time  have  been  better.  But  still  so  inflexible  is  the 
rule  that  no  inquiry  on  that  subject  is  permitted.  The  English 
authorities  on  this  head  are  numerous  and  uniform. 

The  principle  was  acted  on  by  Lord  KING  in  Kuch  v.  San- 
ford,  Select  Cases,  Temp.  King,  61,  and  by  Lord  HARDWICKE  in 
IVliclpdak  v.  CooJcson,  I  Ves.  Sen.  8,  and  the  whole  subject  was 
considered  by  Lord  ELDON  on  a  great  variety  of  occasions.  It 
is  sufficient  to  refer  to  what  fell  from  that  very  learned  and  able 
judge  in  ex  parte  James. 

It  is  true  that  the  questions  have  generally  arisen  on  agree- 
ments for  purchases  or  leases  of  land,  and  not,  as  here,  on  a 
contract  of  mercantile  character.  But  this  can  make  no  differ- 
ence in  principle.  The. inability  to  contract  depends  not  on  the 
subject-matter  of  the  agreement,  but  on  the  fiduciary  character 
of  the  contracting  party ;  and  I  can  not  entertain  a  doubt  of  its 
being  applicable  to  the  case  of  a  party  who  is  acting  as  manager 
of  a  mercantile  or  trading  business,  for  the  benefit  of  others,  no 
less  than  to  that  of  an  agent  or  trustee  employed  in  selling  or 
letting  land.  Was,  then,  Mr.  Blaikie  so  acting  in  the  case  now 
before  us  ?  If  he  was,  did  he  while  so  acting  contract  on  behalf 
of  those  for  whom  he  was  acting  with  himself?  Both  these 
questions  must  obviously  be  answered  in  the  affirmative.  Mr. 
Blaikie  was  not  only  a  director,  but  (if  that  was  necessary)  the 
chairman  of  the  directors.  In  that  character  it  was  his  bounden 
duty  to  make  the  best  bargains  he  could  for  the  benefit  of  the 
company.  While  he  filled  that  character — namely,  on  the  6th 
of  February,  1846 — he  entered  into  a  contract  on  behalf  of  the 
company  with  his  own  firm,  for  the  purchase  of  a  large  quantity 
of  iron  chairs  at  a  certain  stipulated  price.  His  duty  to  the 
company  imposed  on  him  the  obligation  of  obtaining  these  chairs 
at  the  lowest  possible  price.  His  personal  interest  would  lead 
him  in  an  entirely  opposite  direction,  would  induce  him  to  fix 
the  price  as  high  as  possible.  This  is  the  very  evil  against 
(which  the  rule  in  question  is  directed,  and  I  here  see  nothing 
whatever  to  prevent  its  application. 

I  observe  that  Lord  FULLERTON  seemed  to  doubt  whether 
the  rule  would  apply  where  the  party  whose  act  or  contract  is 
called  in  question  is  only  one  of  a  body  of  directors,  not  a  sole 
trustee  or  manager.  But  with  all  deference,  this  appears  to  me 


IN  THE  HOUSE  OF  LORDS.  79 

to  make  no  difference.  It  was  Mr.  Blaikie's  duty  to  give  to  his 
co-directors,  and  through  them  to  the  company,  the  full  benefit 
of  all  the  knowledge  and  skill  which  he  could  bring  to  bear  on  the 
subject.  He  was  bound  to  assist  them  in  getting  the  articles 
contracted  for  at  the  cheapest  possible  rate.  So  far  as  related 
to  the  advice  he  should  give  them,  he  put  his  interest  in  con- 
flict with  his  duty,  and  whether  he  was  the  sole  director,  or  only 
one  of  many,  can  make  no  difference  in  principle. 

The  same  observation  applies  to  the  fact  that  he  was  not  the 
sole  person  contracting  with  the  company ;  he  was  one  of  the 
firm  of  Blaikie  Brothers,  with  whom  the  contract  was  made,  and 
so  interested  in  driving  as  hard  a  bargain  with  the  company  as 
he  could  induce  them  to  make. 

It  can  not  be  contended  that  the  rule  to  which  I  have  re- 
ferred is  one  confined  to  the  English  law,  and  that  it  does  not 
apply  to  Scotland. 

It  so  happens  that  one  of  the  leading  authorities  on  the 
subject  is  a  decision  of  this  House  on  an  appeal  from  Scotland. 
I  refer  to  the  case  of  the  York  Buildings  Company  v.  Mackenzie, 
decided  by  your  Lordships  in  1795.  When  the  respondent, 
Mackenzie,  while  he  filled  the  office  of  "common  agent"  in  the 
sale  of  the  estates  of  the  appellants,  who  had  become  insolvent, 
purchased  a  portion  of  them  at  a  judicial  auction,  and  though 
he  had  remained  in  possession  for  above  eleven  years  after  the 
purchase,  and  had  entirely  freed  himself  from  all  imputation  of 
fraud,  yet  this  House  held  that,  filling  as  he  did  an  office  which 
made  it  his  duty,  both  to  the  insolvents  and  their  creditors,  to 
obtain  the  highest  price,  he  could  not  put  himself  in  the  position 
of  purchaser,  and  so  make  it  his  interest  that  the  price  paid 
should  be  as  low  as  possible. 

This  was  a  very  strong  case,  because  there  had  been  acqui- 
escence for  above  eleven  years ;  the  charges  of  fraud  were  not 
supported,  and  the  purchase  was  made  at  a  sale  by  auction. 
Lord  ELDON  and  Sir  WILLIAM  GRANT  were  counsel  for  the  re- 
spondent, and  no  doubt  every  thing  was  urged  which  their  learn- 
ing and  experience  could  suggest  in  favor  of  the  respondent. 

But  this  House  considered  the  general  principle  one  of  such 
importance,  and  of  such  universal  application,  that  they  reversed 
the  decree  of  the  Court  of  Session,  and  set  aside  the  sale. 


80         ABERDEEN  RAILWAY  COMPANY  v.  BLAIKIE  BROS., 

The  principle,  it  may  be  added,  is  found  in,  if  not  adopted 
from,  the  civil  law.  In  the  Digest  is  the  following  passage : 
"Tutor  rem pupiJli  emere  non  potest ;  idemque  porrigcndum  est 
ad  similia  ;  id  est  ad  curatorcs,  procuratorcs,  et  qui  negotia  aliena 
gerunt."  Dig.  Lib.  xviii,  t.  1,  c.  34,  37. 

In  truth,  the  doctrine  rests  on  such  obvious  principles  of 
good  sense  that  it  is  difficult  to  suppose  there  can  be  any  system 
of  law  in  which  it  would  not  be  found. 

It  was  argued  that  here  the  contract  ultimately  acted  on  was 
not  entered  into  while  Mr.  Blaikie  was  director ;  for  that,  though 
a  contract  had  been  entered  into  in  February,  yet  that  contract 
was  afterward  abandoned,  and  new  terms  agreed  on  in  the  fol- 
lowing month  of  June.  This,  however,  is  not  a  true  representa- 
tion of  the  facts.  The  contract  of  February  was,  it  is  true,  af- 
terward modified  by  arrangement  between  the  parties ;  but  this 
can  not  vary  the  case.  If,  indeed,  the  contracting  parties  had 
in  June  unconditionally  put  an  end  to  the  original  contract,  so 
as  to  release  each  other  from  all  obligation,  the  one  to  purchase, 
and  the  other  to  sell,  at  a  stipulated  price,  the  case  would  have 
assumed  a  different  aspect.  But  this  was  not  done.  The  con- 
tract of  June  was  not  a  contract  entered  into  between  the  par- 
ties on  the  footing  of  there  being  no  obligation  then  binding  on 
them ;  but  an  agreement  to  substitute  one  contract  for  another, 
supposed  to  bef  binding.  Messrs.  Blaikie  did  not  say  to  the  di- 
rectors, in  June :  We  have  no  binding  contract  with  you,  but  we 
are  now  willing  to  contract.  What  they  said  amounted  in  fact 
to  this  :  We  have  a  contract  which  was  entered  into  in  February  ; 
but  we  are  ready,  if  you  desire,  to  modify  it.  To  hold  that  this, 
in  any  manner,  cured  the  invalidity  of  the  original  contract, 
would  be  to  open  a  wide  door  for  enabling  all  persons  to  make 
the  rule  in  question  of  no  force. 

It  was  further  contended  that  whatever  may  be  the  general 
principle  applicable  to  questions  of  this  nature,  the  Legislature 
has,  in  cases  of  corporate  bodies  like  this  company,  modified 
the  rule. 

The  statute,  i.  e..  the  Companies'  Clauses  Act,  it  was  argued, 
has  impliedly,  if  not  expressly,  recognized  the  validity  of  the 
contract,  by  enacting  that  its  effect  shall  be  to  remove  4he  di- 
rector from  his  office;  indicating  thereby  that  a  binding 


IN  THE  HOUSE  OF  LORDS.  81 

obligation  would  have  been  created,  which  would  render  the 
longer  tenure  of  the  office  of  director  inexpedient ;  and  your 
Lordships  were  referred  to  the  case  of  Foster  v.  The  Oxford, 
Worcester,  and  Wolverliampton  Railway  Company.  That  was 
an  action  for  breach  of  a  contract  under  seal,  whereby  the  de- 
fendants covenanted  with  the  plaintiffs  (as  in  the  case  now  be- 
fore your  Lordships)  to  purchase  from  them  a  quantity  of  iron. 
The  defendants  pleaded  that,  at  the  time  of  the  contract,  one  of 
the  plaintiffs  Was  a  director  of  their  company,  and  to  this  plea 
there  was  a  general  demurrer. 

That  such  a  contract  would  in  this  country  be  good  at  com- 
mon law,  is  certain.  The  rule  which  we  have  been  discussing 
is  a  mere  equitable  rule,  and  therefore  all  the  Court  of  Common 
Pleas  had  to  consider  was  how  far  the  contract  was  affected  by 
the  statute.  The  decision  was,  that  the  statute  left  the  con- 
tract untouched,  and  that  its  operation  was  only  to  remove  the 
director  from  his  office.  The  85th  and  86th- sections  of  the 
English  statute,  8  and  9  Viet.  c.  16,  on  which  the  Court  pro- 
ceeded, are  in  the  same  words  as  the  88th  and  89th  sections  of 
the  Scotch  statute,  and  the  counsel  at  your  Lordships'  bar  relied 
on  this  decision  as  being  strictly  applicable  to  the  case  now  un- 
der appeal.  But  there  is  a  clear  distinction  between  them.  In 
Scotland  there  is  no  technical  division  of  law  and  equity.  The 
whole  question,  equitable  as  well  as  legal,  was  before  the  Court 
of  Session.  All  that  the  Court  of  Common  Pleas  decided  was, 
that  a  contract  clearly  good  at  law  was  not  made  void  by  an 
enactment  that  its  effect  should  be  to  deprive  one  of  the  con- 
tracting parties  of  an  office.'  This  decision  will  not  help  the 
respondents,  unless  they  can  go  further,  and  show  that  the 
statute  has  had  the  effect  of  making  valid  a  contract  which  is 
bad  on  general  principles, — that  is  to  say,  principles  enforceable 
here  only  in  equity,  but  not  recognized  in  our  courts  of  common 
law.  1  can  discover  no  ground  whatever  for  attributing  to  the 
statute  any  such  effect. 

Its  provisions,  however,  will  still  be  applicable  to  the  case 
of  directors  who  become  interested  in  contracts,  as  representa- 
tives or  otherwise,  and  not  by  virtue  of  contracts  made  by 
themselves. 

I  have,  therefore,  satisfied  myself  that  the  Court  of  Session 

6 


82        ABERDEEN  RAILWAY  COMPANY  v.  BLAIKIE  BROS., 

came  to  a  wrong  conclusion.     I  therefore  move  your  Lordships 
that  this  Interlocutar  be  reversed. 

THE  LORD  BROUGHAM.  My  Lords,  the  opinion,  or  rather 
the  doubt — at  the  very  utmost  the  inclination  of  opinion — upon 
the  third  plea,  indicated  by  my  Lord  FULLERTON,  I  quite  agree 
with  my  noble  and  learned  friend  in  thinking,  ought  not  to 
weigh  in  this  case ;  and  therefore  we  have  only  to  dispose  of  the 
general  question.  I  also  arrive  at  exactly  the  same  conclusion 
with  my  noble  and  learned  friend,  that  the  law  of  Scotland  dif- 
fers in  no  respect  from  the  law  of  England  upon  this  matter;  as 
to  which  it  is  very  important  to  have  it  understood  that  there  is 
really  no  difference  between  the  two  systems  of  jurisprudence. 

The  case  of  Wlielpdale  v.  Cookson,  and  ex  parte  James,  clearly 
lay  down  what  the  law  of  England  upon  this  point  is.  And  it  is 
observable  that  Lord  ELDON,  both  in  ex  parte  James  and  in  ex 
parte  Lace,  goes  even  further  than  Lord  HARDWICKE  did  in 
Wlielpdale  v.  Cookson,  and  considers  (though  he  expresses  it,  no 
.doubt,  with  the  respect  due  to  that  eminent  judge,  rather  as  a 
grave  doubt  than  as  a  well-matured  opinion)  that  Lord  HARD- 
WICKE had  scarcely  given  full  effect  to  the  principle,  when  he 
said  that  it  was  possible  that  the  assent  of  the  creditors  might 
validate  the  sale  (a). 

How  far  the  two  systems  of  law  are  the  same  upon  this  very 
important  question,  appears  not  only  from  the  case  of  the  York 
Buildings  Company  v.  Mackenzie,  which  is  the  ruling  case  upon 
this  subject,  and  which  was  decided  upon  an  appeal  from  Scot- 
land, and  according  to  the  principles  of  Scotch  law,  in  this 
House ;  but  it  also  appears  from  tthe  fact  that  in  that  case  a 
distinct  reference  was  made  to  the  English  law  authorities,  and 
to  the  very  case  before  Lord  HARDWICKE,  of  Wlielpdale  v.  Cook- 
son.  TJie  case  of  ex  parte  James,  indeed,  could  not  have  been 
there  cited,  because  it  was  not  decided  till  1803;  but  the  case 
of  Wlielpdale  v.  Cookson  is  referred  to  in  the  argument  at  the 
Scotch  bar,  and  in  the  printed  Appeal  Cases;  and  so  likewise 
is  the  passage  from  the  Pandects,  which  my  noble  and  learned 
friend  has  read. 

(a)  What  Lord  HARDWICKE  said  was,  the  "majority  of  the  creditors;"  and 
this  was  apparent  by  what  Lord  ELDON  dissented  from.  6  Vesey,  628. 


IN  THE  HOUSE  OF  LORDS.  83 

It  is  also  to  be  observed,  that  not  only  were  the  English 
cases  cited  in  Scotland,  in  that  •  instance,  but,  conversely,  the 
Scotch  case  of  the  York  Buildings  Company  v.  Mackenzie  has 
been  referred  to  since,  in  the  English  cases,  repeatedly,  at  the 
bar,  and  once  or  twice,  I  think,  Joy  Lord  ELDON  himself,  in  dis- 
posing of  English  cases. 

My  Lords,  the  judgment  in  the  York  Buildings  Company  v. 
Mackenzie  was  after  eleven  years  of  possession ;  and  it  is  re- 
markable, too,  that  there  was  no  fraud  whatever  found  imputable 
to  Mr.  Mackenzie,  the  purchaser.  I  think  that  in  the  account 
of  the  subsequent  proceedings,  though  not  in  the  court  below,  it 
appears  that  so  entirely  bona  fide,  was  Mr.  Mackenzie's  posses- 
sion found  to  have  been,  that  the  rule  of  the  civil  law,  happily 
the  rule  in  Scotland,  though  most  unfortunately  never  introduced 
into  our  jurisprudence,  namely,  that  "  Fruges  bona  fide  perceptcz 
et  consumptce"  are  held  to  be  the  property  of  the  party  who  is 
ultimately  found  not  to  have  the  title,  was  applied  in  the  case 
of  Mackenzie.  So  entirely  free  from  all  imputation  of  fraud 
was  he  found  to  be,  that  he  was  allowed  to  remain  in  undisputed 
and  undisturbed  possession  of  the  rents  and  profits  of  the  estate 
during  those  eleven  years — that  is,  up  to  the  period  of  the  judg- 
ment on  the  appeal — because  the  rule  applies  not  only  to  the 
extent  that  the  bona  fides  avails  the  party  in  possession  up  to 
the  time  of  a  decree  against  him  in  the  court  below,  but  his 
right  to  the  possession  of  the  "fruges  bona  fide  perceptce  et  con- 
sumptce"  is  held  to  inure  up  to  the  final  decision  in  the  Court 
of  Appeal.  And,  accordingly,  Mr.  Mackenzie's  bona  fides  was 
found  to  have  been  so  unimpeachable  in  the  case,  and  his  con- 
duct in  the  whole  transaction  was  found  to  have  been  so  entirely 
without  fraud,  that  not  only  did  the  court  below  find  the  other 
party  liable  to  costs,  because  they  had  charged  him  with  fraud, 
but  afterward  he  was  adjudged  to  have  the  whole  of  the  ex- 
penses allowed  him  to  which  he  had  been  put  in  ornamental 
improvements  upon  the  estate  (a).  That  is  certainly  one  very 
strong  instance  of  the  application  of  the  rule ;  perhaps  it  is 
stronger  than  any  other  within  our  recollection,  because  in  that 
case  it  clearly  shows  that  so  entirely  was  the  opinion  of  the 

(a)  It  appears  that  there  were  three  more  appeals  by  the  company  against 
Mr.  Mackenzie,  in  all  of  which  they  were  unsuccessful. 


8-4         ABERDEEN  RAILWAY  COMPANY  v.  BLAIKIE  BROS., 

Court  in  favor  of  the  rule,  that  even  while  they  held  that  the 
transaction  could  not  be  sustained,  but  that  the  purchase  was 
invalid,  they  nevertheless  decreed  the  purchaser  possession  of 
the  rents  and  profits,  and  also  to  be  allowed  for  the  expenses  of 
ornamental  improvement. 

In  that  case,  my  Lords,  I  must  also  observe  that  it  was  not 
merely  the  decision  of  this  House  which  set  the  court  below  right 
upon  a  point  of  Scotch  law,  as  it  has  once  and  again  done ;  but 
the  Scotch  law  appears  to  have  been  by  no  means  distinctly  and 
uniformly  maintained  by  the  court  below  to  be,  as  it  was  ulti- 
mately found  not  to  be,  by  your  Lordships'  decision.  It  was  an 
action  of  reduction  for  setting  aside  the  sale ;  and,  in  the  first 
instance,  the  court  below  decided  against  the  pursuers,  and  re- 
pelled the  reasons  for  reduction.  On  a  reclaiming  petition,  how- 
ever, the  court,  by  a  narrow  majority,  sustained  tke  reasons  of 
reduction,  and  set  aside  the  sale.  Then  again  came  both  par- 
ties to  reclaim  against  this  second  decision ;  and,  by  a  narrow 
majority  again,  the  court  assoilzied  the  defender,  and  found,  as 
I  have  already  stated,  that,  in  respect  of  the  charge  of  fraud, 
the  defender,  Mr.  Mackenzie,  was  entitled  to  his  expenses. 
Therefore,  it  can  not  be  said  to  have  been  at  all  the  under- 
standing of  the  Court  of  Session  that  the  law  was  clearly  in 
favor  of  such  purchases  at  the  time,  when  you  find  these  two 
conflicting  decisions  in  the  court  below,  and  each  by  such  a  very 
narrow  majority.  At  that  time,  unfortunately,  the  course  of  re- 
porting in  Scotland  was  that  the  judge's  opinions  were  not 
given ;  and  it  is  only  accidentally  and  rarely  that  you  find  any 
reference  made  to  what  passed  upon  the  bench ;  but  in  this  case 
it  is  stated,  in  the  report,  that  several  of  the  judges  expressed  a 
strong  opinion  against  the  validity  of  the  purchase,  and  the  rea- 
sons are  given.  And  the  very  ground  which  had  been  urged 
for  sustaining  the  purchase,  and  the  validity  of  the  transaction ; 
namely,  that  in  judicial  sales  it  had  been  a  very  usual  practice 
for  common  agents  to  become  the  purchasers,  and  that  though 
in  eighteen  out  of  one  hundred  and  thirty-five  instances  they 
became  the  purchasers,  yet  no  instance  had  been  found  of  an 
attempt  made,  or  certainly  of  an  attempt  succeeding,  to  set  aside 
such  a  purchase  (but  the  report  would  rather  go  the  length  of 
stating  that  no  instance  had  been  found  of  an  attempt  made  to 


IN  THE  HOUSE  OF  LORDS.  85 

set  aside  any  such  purchase) — the  learned  judges,  1  say,  who 
held  such  purchases  illegal,  were  of  opinion  that  the  occurrence 
of  them  in  practice  was  a  ground  which  afforded  all  the  stronger 
reason  for  the  court  laying  down  what  the  law  of  honesty  and 
what  the  law  of  common  sense  was,  in  disapproving  of  such 
transactions  (#)• 

My  Lords,  I  also  agree  with  my  noble  and  learned  friend 
that  the  decision  in  the  case  of  Foster  v.  the  WolverTiampton 
Company,  in  the  Common  Pleas,  upon  which  great  reliance  was 
placed,  and  which  appears,  to  a  certain  degree  at  least,  to  have 
been  the  ruling  decision  in  the  court  below,  does  not  apply  to 
this  case ;  because  there  the  transaction  was,  past  all  doubt, 
valid  at  common  law,  though  not  in  equity — but  had  the  Court 
of  Common  Pleas  had  an  equitable  jurisdiction  as  well  as  a 
common  law  jurisdiction,  the  anomaly  never  could  have  hap- 
pened of  a  transaction  being  found  legal  and  valid  in  that  court 

(a)  HISTORY  OF  THE  YORK  BUILDINGS  COMPANY  CASE. 
[This  very  interesting  note  is  added  from  the  report  in  1  M'Queen,  481.] 

The  case  of  the  York  Buildings  Company  v.  Mackenzie,  so  far  as  its  legal 
principle  is  concerned,  is  better  known  and  more  attended  to  in  England  than 
in  Scotland.  The  argument  at  the  bar  of  the  House  of  Lords  (during  two  ses- 
sions of  Parliament,  1794  and  1795)  lasted  sixteen  days.  Judgment  was  given 
on  the  seventeenth.  Lord  LOUGHBOROUQH  was  indeed  chancellor  then;  but  the 
tradition  (there  is  no  report)  is  that  Lord  THURLOW  (who  had  decided  Fox  v. 
Mackreth  very  shortly  before)  took  the  chief  part  in  the  hearing  and  deliberation. 
He  is  recorded  in  the  journals  of  the  House  as  present  every  day.  The  judgment 
pronounced  is  not  a  mere  reversal,  but  is  followed  by  elaborate  prospective  and 
retrospective  directions,  drawn  after  the  fashion  of  a  chancery  decree.  Lord 
ELDON  and  Sir  WILLIAM  GRANT,  3  Vesey,  746,  designate  it  as  the  great  case  of 
York  Buildings  Company  v.  Mackenzie;  and  Lord  ST.  LEONARDS,  in  his  Vend,  and 
Pur.  Vol.  3,  240,  calls  it  likewise  the  great  case,  and  refers  to  it  repeatedly. 
Messrs.  White  and  Tudor  cite  it  in  their  Leading  Equity  Cases,  Vol.  1,  72,  109; 
but  Mr.  Ross  omits  it  in  his  similar  work  on  Scotch  Law — a  circumstance  which 
is  mentioned,  not  as  impeaching  that  most  useful  collection,  but  simply  as  show- 
ing that  this  case,  which  has  always  been  regarded  as  a  ruling  authority  in 
England,  is  comparatively  forgotten  in  the  country  from  whence  it  came.  Mr. 
Forsyth,  indeed,  in  his  learned  work  on  the  Law  of  Trusts  in  Scotland,  gives 
somewhat  of  a  legislative  character  to  the  York  Buildings  Company  v.  Mackenzie, 
by  observing  that  "it  introduced  a  principle  into  the  Scotch  law  from  that  of 
England;"  which  is  all  he  has  to  say  of  it,  and  which  shows  how  little  the  case 
has  been  adverted  to  in  the  Court  of  Session.  And  yet  the  "borrowing  of  prin- 
ciple,"'to  which  Mr.  Forsyth  refers,  has  been  by  the  law  of  England;  which,  till 
the  decision  of  this  Scotch  appeal,  was  very  barren  on  the  point  in  question,  as 


•"86          ABERDEEN  RAILWAY  COMPANY  v.  BLAIKIE  BROS. 

which  could  not  stand  an  examination  on  the  other  side  of 
Westminster  Hall.  It  has  not  often  occurred  to  me  to  see  a 
stronger  instance  of  the  great  inconvenience,  to  say  the  very 
least  of  it,  of  that  division  between  the  two  sides  of  Westminster 
Hall — I  will  not  say  that  impassible  barrier  between  them,  for,  on 
the  contrary,  the  barrier  is  constantly,  and  must  be  for  the  sake 
of  justice  constantly,  passed — but  I  have  seldom  seen  a  more 
striking  instance  of  the  inconvenience  of  the  existence  of  that 
division,  and  of  not  allowing  the  court  to  exercise  both  juris- 
dictions, at  all  events  whenever  a  case  arises  in  which  entire 
justice  can  not  be  done  without  the  exercise  of  both  juris- 
dictions. 

My  Lords,  upon  the  whole,  I  entirely  agree  with  my  noble 
and  learned  friend,  that  there  has  been  here  a  miscarriage  in 
the  court  below,  and  that  the  Interlocutor  in  this  ca.se  should  be 
reversed. 


may  be  seen  from  the  meager  case  of  Keech  v.  Stanford,  decided  by  Lord  KING  in 
1736.  See  Browne's  Parl.  Cases,  Vol.  3,  42,  and  Morr.  Diet.  13,  337. 

The  counsel  in  the  York  Buildings  Company  v.  Mackenzie  were,  for  the  appel- 
lants, R.  Dundas,  James  Mansfield  (afterward  Chief  Justice  of  the  Conypon  Pleas), 
and  J.  Mackintosh;  and  for  the  respondents,  the  Attorney-General  (Scott,  afterward 
Lord  ELDOX),  R.  Blair  (afterward  Lord  President),  W.  Grant  (afterward  Master 
of  the  Rolls),  W.  Miller,  and  W.  Adam. 

The  York  Buildings  Company  had  purchased  from  the  crown  certain  estates 
which  had  been  confiscated  for  the  rebellion  of  1745.  They  carried  on  certain 
works  on  them,  and  in  process  of  time  became  bankrupt  and  were  sequestrated. 
Their  estates,  or  some  of  them,  were  sold  by  public  auction,  under  the  manage- 
ment of  Mr.  Mackenzie,  a  writer  to  the  signet,  as  common  agent  for  creditors.  At 
one  of  the  sales  he  was  himself  the  purchaser.  The  decision  is  that  he  ought  not 
to  have  been  so,  having  regard  to  his  fiduciary  position. 

In  the  last  century,  sixteen  days'  hearing  in  the  House  of  Lords  meant  six- 
teen half  days.  The  lord  chancellor  went  first  to  his  own  court,  and  did  not 
take  his  place  on  the  woolsack  till  one  or  two  o'clock.  It  was  generally  two  be- 
fore business  began. 

Since  writing  the  above,  I  have  received  from  Mr.  David  Robertson  a  note, 
saying:  "I  have  a  strong  recollection  of  the  very  impressive  speech  of  Lord 
THURLOW  on  the  appeal,  York  Buildings  Company  v.  Mackenzie.  I  was  present. 
Lord  LOUOUBOKOUOH,  the  chancellor,  spoke  after  Lord  THURLOW. 


HOFFMAN  COAL  CO.  v.  CUMBERLAND  CO. 


87- /03 


HOFFMAN  STEAM  COAL  COMPANY  v.  CUMBERLAND  COAL  AND 
IRON  COMPANY  (a). 

[This  case  was  decided  at  the  June  term,  1860,  of  the  Maryland  Court 
of  Appeals,  composed  of  Chief  Justice  JOHN  C.  LE  GRAND,  and  Associates 
WM.  H.  TUCK,  JAMES  L.  BARTOL,  and  JOHN  B.  ECCLESTON,  and  reported 
in  the  16  vol.  Maryland  Reports,  456.] 

A  director  of  a  corporation,  at  the  time  of  the  sale  of  part  of  its  property  was 
contemplated  and  made,  and  who  actively  participated  in  all  the  measures 

(a)  The  same  subject-matters  of  litigation  were  decided  by  the  Supreme 
Court  of  New  York,  at  a  special  term  held  in  January,  1859,  in  a  case  in  which 
the  Cumberland  Coal  and  Iron  Company  was  plaintiff,  and  Sherman,  Dean,  and 
Postly  were  defendants.  It  is  reported  in  30  Barbour,  553,  to  which  reference  is 
made  for  a  full  report.  In  consequence  of  the  importance  of  the  principles  in- 
volved, and  the  clearness  and  great  ability  of  the  decision  of  Justice  HENRY  E. 
DAVIES  therein,  it  was  at  first  determined  to  reproduce  the  New  York  decision 
in  full.  But  much  of  it  being  a  careful  consideration  and  affirmation  of  the 
leading  cases  already  given  herein,  and  of  the  many  others  therein  cited,  this 
would  be  taking  too  much  space,  although  it  would  be  justified  by  the  intrinsic 
merits  of  the  decision  and  the  great  principles  reaffirmed  therein.  The  syllabus 
of  the  New  York  decision  is  given,  to  show  the  concurrence  of  the  courts  of  the 
two  states;  and  in  a  subsequent  note  to  the  Maryland  Report  is  appended  so 
much  of  Judge  DAVIES'S  opinion  as  treats  of  the  alleged  confirmation  or  ratification 
of  the  acts  of  Sherman  by  the  stockholders  of  the  Cumberland  Coal  Company : 

SYNOPSIS. — "An  agent,  employed  to  examine  and  ascertain  how  much  and 
what  part  of  the  lands  of  his  principal  can  be  sold  without  inconvenience,  and 
to  set  off  by  metes  and  bounds  such  portions  as  he  in  his  judgment  shall  deem 
advisable,  and  to  report  his  proceedings  to  his  principal,  can  not,  after  examining 
the  property  and  recommending  a  sale  of  a  portion  thereof,  purchase  the  property 
himself,  and  take  a  conveyance  thereof  for  his  own  benefit.  And  if  such  agent, 
after  so  purchasing  the  property,  organizes  a  company,  in  which  he  becomes  a 
director  and  a  large  stockholder,  and  transfers  and  conveys  the  land,  and  assigns 
a  contract  relating  to  it,  to  such  company,  the  company  will  be  charged  with  no- 
tice of  the  facts  and  circumstances  attending  the  purchase  by  its  grantor,  and 
will  stand  in  no  better  position  than  he  occupies. 

"  Under  such  circumstances,  the  principal  is  entitled,  at  his  option,  to  have 
the  sale  to  its  agent  vacated  and  set  aside,  both  as  against  the  agent  himself  and 
those  to  whom  he  has  conveyed  with  notice  of  the  facts.  And,  as  an  agent  is  in- 
capacitated to  purchase  for  himself,  so  is  he  also  incapacitated  to  act  for  another 
person  in  making  the  purchase. 

"A  director  of  a  corporation  is  the  agent  or  trustee  of  the  stockholders,  and 
as  such  has  duties  to  discharge,  of  a  fiduciary  nature,  toward  the  principal;  and 
is  subject  to  the  obligations  and  disabilities  incident  to  that  relation. 

"  What  will  amount  to  a  confirmation  or  ratification,  by  the  stockholders  of  a 
corporation,  of  a  sale  made  by  its  directors." 


SS       HOFFMAN  COAL  CO.  v.  CUMBERLAND  CO., 

tending  to  its  completion,  and  had  full  knowledge  of  all  the  circumstances 
attending  its  progress,  is  not  competent  to  become  a  purchaser  of  such  prop- 
erty, and  the  sale  to  him  can  not  be  upheld,  if  resisted  by  the  corporation. 

A  party  joining  in"  a  purchase  from  a  corporation,  with  knowledge 'of  the  fact 
that  his  co-purchaser  was  a  director  of  the  corporation,  is  affected  with  what- 
ever of  legal  disability  belonged  to  the  director  by  reason  of  that  relation. 

A  director,  having  purchased  lands  from  a  corporation,  united  with  others  in 
forming  a  new  corporation,  he  subscribing  for  almost  all  of  the  stock  therein, 
and  becoming  one  of  its  officers  and  directors,  and  on  the  next  day,  in  pur- 
suance of  one  entire  plan,  conveyed  the  same  lands  to  the  new  company  in 
payment  of  his  subscription  for  such  stock. 

Held,  that  the  new  company  is  affected  with  notice  of  the  circumstances  impair- 
ing the  title  of  the  party  so  conveying  the  lands  to  it,  and  can  not  claim  to 
be  a  bona  fide  purchaser  without  notice. 

Trustees  can  not  purchase  at  their  own  sales,  either  directly  or  indirectly,  and 
if  they  do,  such  purchase  will  be  set  aside  on  the  proper  and  reasonable  ap- 
plication of  the  parties  interested. 

The  same  doctrine  applies  to  purchases  by  persons  actjng  in  any  fiduciary  ca- 
pacity, which  imposes  on  them  the  obligation  of  obtaining  tb_e  best  terms  for 
the  vendor,  or  which  has  enabled  them  to  acquire  a  knowledge  of  the  prop- 
erty. A  director  of  a  corporation  holds  such  a  relation  to  its  stockholders. 

To  render  the  ratification  of  such  a  sale  effective  and  conclusive,  the  principal 
must,  at  the  time  of  the  ratification,  be  fully  aware  of  every  material  fact, 
and  his  act  of  ratification  be  an  independent  substantive  act,  founded  on 
complete  information,  and  he  must  not  only  be  aware  of  the  facts,  but  ap- 
prized of  the  law  as  to  how  these  facts  would  be  dealt  with  if  brought  before  a 
court  of  equity. 

Where  a  purchaser,  with  notice  from  a  trustee,  conveys,  for  a  valuable  consider- 
ation, to  another  person  who  has  no  notice  of  the  trust,  the  estate  will  not 
be  affected  with  the  trust  in  the  hands  of  the  second  purchaser.  x 

Wm.  Scliley,  for  appellant.  Geo.  A.  Thntston  and  Geo.  W. 
Dolbin,  for  appellee. 

LE  GRAND,  Chief  Justice,  delivered  the  opinion  of  this 
Court. 

This  is  an  appeal  from  an  order  granting  an  injunction,  and 
from  a  subsequent  order  continuing  the  same,  upon  the  hearing 
of  a  motion  to  dissolve,  passed  by  the  Circuit  Court  of  Alle- 
ghany  County,  in  an  equity  cause  therein  depending,  in  which 
the  Cumberland  Coal  and  Iron  Company  was  the  complainant, 
and  Alkn  M.  Sherman,  William  B.  Dean,  and  the  Hoffman 
Steam  Coal  Company,  were  defendants.  The  motion  to  dissolve 
was  made  by  all  the  defendants,  and  being  overruled  in  the 
opinion  of  the  court,  after  an  amendment  was  made  to  the  bill 
of  complaint,  the  formal  order  was  filed,  the  amended  bill  having 


IN  THE  MARYLAND  COURT  OF  APPEALS.  89 

been  answered  by  all  the  defendants.  The  Hoffman  Steam  Coal 
Company  alone  appealed. 

The  object  of  the  bill  is,  to  cause  to  have  declared  null  and 
void  certain  deeds  of  lands  from  the  complainant  to  Messrs. 
Sherman  and  Dean,  and  the  cancellation  of  a  contract  entered 
into  with  them  by  the  complainant,  for  the  transportation  of 
coal,  etc.,  over  a  railroad  belonging  to  the  latter.  And  also,  to 
procure  a  transfer  of  the  aforesaid  kinds  to  the  complainant,  the 
same  having  been  conveyed,  as  also  the  contract  of  transporta- 
tion, to  the  appellant.  The  bill  prays  an  accounting  on  the  part 
of  the  defendants,  as  to  the  coal,  etc.,  which  have  been  mined 
and  transported  from  the  lands  mentioned  in  the  proceedings ; 
and  also,  an  injunction  restraining  the  disposition  arid  sale  of 
any  of  said  lands,  the  stock  of  the  appellant,  or  the  transfer  of 
the  contract  relating  to  transportation. 

The  whole  equity  of  the  complainant  restg  on  two  principal 
allegations.  First,  fraud  in  fact,  on  the  part  of  Sherman  and 
Dean,  in  their  dealings  with  the  property  of  the  complainant; 
and  second,  that  if  there  be  no  such  fraud  in  fact,  as  to  vitiate 
the  whole  transaction,  the  laiv,  under  the  circumstances  of  this 
case,  imputes  such  knowledge  to  the  appellant,  of  the  relation 
of  Sherman  to  the  complainant  and  the  course  of  his  proceed- 
ings, as  will  affect  its  title  with  whatever  infirmity  belonged  to 
his  title. 

The  principal  and  operative  facts  detailed  in  the  bill  of  com- 
plaint may  be  thus  stated  : 

The  complainant  was  incorporated  by  the  state  of  Maryland, 
at  December  session,  1 840.  Andrew  Mehaffey  was  its  president 
from  the  20th  of  March,  1854,  to  the  7th  of  June,  1858.  Sher- 
man became  a  director,  by  an  election  to  fill  a  vacancy,  on  the 
21st  of  February,  1855,  and  continued  to  be  such  until  the  29th 
of  May,  1858.  On  the  4th  of  April,  1855,  Sherman  was  ap- 
pointed chairman  of  a  committee  to  prepare  by-laws ;  and  as 
such,  on  the  4th  day  of  June,  1855,  reported  to  a  meeting  of 
stockholders,  that  an  executive  committee  should  be  created,  to 
be  constituted  of  three  directors,  two  of  whom  to  form  a  quorum, 
the  committee  to  be  appointed  exclusively  by  the  president ; 
that  in  pursuance  of  the  authority  conferred  upon  him  by  the 
adoption  of  the  report,  the  president,  Mehaffey ,  appointed 


90       HOFFMAN  COAL  CO.  v.  CUMBERLAND  CO., 

Messrs.  Sherman,  Francis  Bloodgood,  and  Joseph  Torrey  an 
executive  committee,  and  as  such  they  continued  to  act  until 
the  29th  day  of  May,  1858,  but  they  never  kept  any  record 
of  their  proceedings.  That,  on  the  9th  day  of  October, 
1855,  Sherman,  at  a  meeting  of  the  board  of  directors  of  the 
complainant,  held  in  the  city  of  New  York,  proposed  for  the 
adoption  of  the  directors,  which  was  done,  the  following  resolu- 
tion:  "Resolved,  That  the  president  appoint  a  committee  of  five 
directors,  whose  duty  it  shall  be  to  proceed  to  the  company's 
property  in  Maryland,  and  ascertain  how  much  and  what  part 
of  their  lands  can  be  sold  without  interfering  with  the  working 
and  facilities  of  the  company ;  and,  if  practicable,  that  they  ap- 
portion and  set  off,  by  metes  and  bounds,  such  portions  as  they, 
in  their  judgment,  shall  deem  advisable,  and  report  the  result 
of  their  commission  to  this  board  at  the  earliest  day  practica- 
ble." Sherman  was  appointed  chairman  of  the  committee, 
having  associated  with  him  on  it  Joseph  Torrey,  M.  N.  Falls, 
William  Petit,  and  Francis  Bloodgood.  This  committee  was 
appointed  by  the  president,  Mehaffey,  who,  on  motion,  was  added 
to  it.  Only  Sherman,  Mehaffey,  and  Petit  acted  and  visited  the 
lands.  On  the  llth  of  December,  1855,  they  made  a  report 
recommending  a  sale  of  a  portion  of  the  lands  of  the  complain- 
ant ;  a  resolution  was  passed  authorizing  a  sale  of  land  for 
$200,000.  On  the  15th  of  January,  1856,  another  resolution 
was  passed,  which,  after  referring  to  that  of  the  llth  of  De- 
cember, and  declaring  its  execution  to  have  been  found  imprac- 
ticable, proceeds  as  follows :  "  It  is  understood  that  a  sale  of  a 
less  quantity  of  land  for  $150,000,  or  thereabout,  may  be  ef- 
fected, which  sale,  it  is  believed,  will  accomplish  all  the  ends, 
etc. ;  therefore,  Resolved,  That  the  president  and  secretary  be, 
and  they  are  hereby,  authorized  and  directed  to  make  such  sale, 
by  executing  a  deed  of  the  land  to  be  sold,  and  to  make  and 
execute  such  covenants  and  agreements,  on  the  part  of  and  in 
the  behalf  of  this  company,  and  as  they  may  deem  necessary  to 
accomplish  the  ends  above  mentioned.  Resolved,  That  the  pres- 
ident be,  and  he  is  hereby,  authorized  to  modify  the  terms  and 
conditions  of  such  sale,  in  his  discretion,  if  he  shall  deem  it 
necessary  to  the  accomplishment  of  such  sale." 

On  the  22d  of  April,  1856,  at  the  city  of  New  York,  a  deed 


IN  THE  MARYLAND  COURT  OF  APPEALS.  91 

of  conveyance  of  certain  lands  belonging  to  the  complainant, 
and  therein  described,  and  a  certain  agreement  relating  to  trans- 
portation, were  executed  and  delivered  by  Mehaffey,  as  president, 
to  Sherman  and  Dean.  •  This  transaction  was,  on  the  13th  of 
May,  1856,  reported  to  a  meeting  of  the  directors  of  the  Cum- 
berland Coal  and  Iron  Company ;  and  according  to  the  minutes 
of  its  proceedings,  "after  explanation,"  it,  as  well  as  the  acts 
of  the  president  and  secretary,  were,  by  the  board,  "unani- 
mously approved,"  and  a  copy  of  the  deed,  together  with  the 
agreement  entered  into,  directed  to  be  placed  on  file  for  future 
reference. 

On  the  19th  day  of  August,  1858,  the  Hoffman  Steam  Coal 
Company,  of  Alleghany  County,  was  formed,  under  the  act  of 
Assembly  of  this  state,  of  1852,  chap.  322.  On  the  20th  of 
August,  1858,  Sherman  and  wife,  and  Dean,  conveyed  to  the 
Hoffman  Company  the  land  which  had  been  conveyed  by  Me- 
haffey to  Sherman  and  Dean ;  and,  according  to  the  bill,  were 
about  "to  execute  and  deliver  to  the  said  company  an  assignment 
of  the  aforesaid  contract  for  transportation,  or  other  instrument 
purporting  to  impart  to  the  said  company  rights  under  and  by 
virtue  of  the  said  contract."  The  bill  alleges  the  capital  stock  of 
the  Hoffman  Company  to  consist  of  5,000  shares,  of  which  they 
charge,  "on  information  and  belief,"  Sherman  and  Dean  became 
subscribers  to  the  number  of  4,990  shares ;  that  Sherman  was 
a  subscriber  for  about  five-eighths  of  the  shares,  and  Dean  for 
about  three-eighths  of  the  shares ;  and  that  the  other  two  [ten] 
shares  were  nominally  taken  by  other  parties  for  the  purpose  of 
enabling  the  said  parties  to  participate  in  the  formation  of  the 
said  company,  and  become  directors  thereof.  The  bill  charges 
that  Sliermnn,  in  the  form  of  stock  issued  by  the  Hoffman  Com- 
pany, still  retains  his  interest  in  the  lands  mentioned  in  the 
deeds  executed  by  the  president  of  the  complainant,  and  also  in 
the  contract  of  transportation ;  and  that  he  retains  possession 
of  the  deed  and  contract ;  that  he  is  an  officer  as  well  as  direc- 
tor of  the  company,  and  has  and  exercises  entire  practical  con- 
trol of  the  company;  and  that  the  change  or  conversion  of  his 
ownership  in  the  lands  into  an  interest  in  the  stock  is  a  fraudu- 
lent device,  for  the  purpose  arid  with  the  design  of  evading  the 
jurisdiction  and  process  of  the  court.  It  also  charges  that  the 


92       HOFFMAN  COAL  CO.  v.  CUMBERLAND  CO., 

Hoffman  Company  had,  before  the  execution  and  delivery  to  the 
said  company  of  the  deed  by  Sherman  and  Dean,  and  before  the 
formation  of  any  company,  whereby  the  said  company  was  to  ac- 
quire or  enjoy  any  of  the  advantages  conferred  by  the  said  contract 
for  transportation,  and  that  the  defendant  Dean  also  had,  before 
he  entered  into  the  purchase  of  the  lands,  or  into  the  contract 
for  transportation,  full  notice  of  the  frauds  in  said  sale,  in  the 
procurement,  origin,  formation,  execution,  and  delivery  of  the 
deed,  and  of  the  contract  for  transportation,  and  of  all  the  facts 
relating  thereto. 

In  addition  to  the  fraud  alleged  in  the  procurement  of  the 
deed  and  contract  by  Sherman,  the  bill  alleges  the  price  agreed 
to  be  paid  for  the  land  to  be  grossly  inadequate,  and  the  terms 
of  the  contract  of  transportation  to  be  ruinous  to  the  Cumber- 
land- Coal  and  Iron  Company.  It  also  denies  there  has  been  a 
payment  according  to  the  terms  of  the  purchase,  and  asserts 
that  Dean  was  but  a  mere  tl  representative  man,''  by  which  is 
meant  one  without  pecuniary  substance. 

The  gravamen  of  the  bill  is,  that  Sherman,  with  others,  but 
principally  with  Mehaffey,  conspired  to  despoil  the  complainant 
of  its  property  by  proceedings  conducted  by  them  as  its  officers, 
and  that  full  knowledge  of  all  the  facts  and  circumstances  was 
had  by  the  Hoffman  Company,  Sherman  being  practically  and 
really  the  company ;  and  that,  whether  or  not  there  be  sufficient 
evidence  of  fraud  in  fact,  on  the  part  of  those  charged  with  it, 
nevertheless,  in  the  contemplation  of  the  law,  the  transaction  is 
such  as  will  be  declared  null  and  void  and  of  non-effect,  on 
grounds  of  public  policy. 

Sherman  and  Dean,  in  their  answers,  deny  all  fraud,  the 
latter  disclaiming  all  knowledge  of  Sherman  or  of  his  transac- 
tions, until  he  became  connected  with  the  purchase  of  the  land. 
The  Hoffman  Company,  in  its  answer,  sworn  to  by  its  president, 
S.  Brooke  Postly,  admits  the  formation  of  the  company,  and 
that  Sherman  and  Dean  conjointly  took  the  capital  stock  thereof 
to  the  extent  of  4,990  shares,  and  avers  that  the  other  ten  shares 
were,  at  the  same  time,  subscribed  for  by  other  parties,  and  de- 
nies that  it  is  true  that  the  said  ten  shares  were  nominally  sub- 
scribed for  by  said  other  parties,  and  says  they  were  paid  for 
by  such  other  parties,  and  were  not  subscribed  for  on  behalf  of 


IN  THE  MARYLAND  COURT  OF  APPEALS.  93 

Sherman  and  Dean,  or  either  of  them.  It  states  that  Sherman 
and  Dean  have  since  sold,  actually  and  bona  fide,  a  large  part 
of  their  stock,  so  that  they  are  not  the  large  holders  they  orig- 
inally were.  It  denies  the  frauds  alleged  in  relation  to  the  con- 
veyance and  contract  of  transportation,  and  insists  that  even 
if  they  existed,  the  company  had  no  knowledge  of  them,  but  be- 
came the  purchaser  of  said  property,  and  assignee  of  said  con- 
tract of  ti'ansportation,  bona  fide  and  for  a  full  and  valuable 
consideration.  It  admits  the  mining  of  coal  on  the  property, 
and  sets  up,  as  a  confirmation  of  the  original  deed  and  contract, 
the  fact  of  the  receipt  by  the  complainant  of  the  price  of  trans- 
porting under  the  contract. 

A  great  deal  of  testimony  was  taken  on  the  side  of  the  com- 
plainant, to  show  what  is  alleged  to  be  the  unconscionable  char- 
acter of  the  contract ;  and  that  what  was  done  at  the  meeting 
of  the  stockholders  of  the  Cumberland  Coal  and  Iron  Company, 
held  on  the  1st  of  June,  1857,  other  than  the  voting  for  pres- 
ident and  directors,  was  unauthorized,  and  that  of  27,997  votes 
cast,  22,508  were  given  by  proxy ;  that  the  parties  voting  by 
proxies  were  only  empowered  to  vote  for  president  and  directors, 
and  several  parties  were  examined  to  show  that  ttey,  as  stock- 
holders, had  no  knowledge  whatever  of  the  conveyance  to,  and 
contract  with,  Sherman  and  Dean,  and  never  intended  to  ratify 
them.  It  is  not  necessary  the  testimony,  on  the  one  side  or  the 
other,  should  be  critically  examined,  inasmuch  as  on  this  appeal 
the  chief  inquiry  will  be,  whether  the  Hoffman  Company  has  a 
standing  in  court  as  an  independent  litigant,  and  as  a  bona  fide 
purchaser  for  value,  and  without  notice  of  the  circumstances 
preceding  and  conducing  to  its  acquisition  of  title. 

Much  was  said,  and  earnestly  said,  in  argument,  in  impeach- 
ment of  the  integrity  of  the  actors  in  these  transactions,  and 
especially  in  the  arraignment  of  the  honesty  of  Sherman  and 
Mehaffey ;  fraud,  studied  and  systematic,  was  imputed  to  them 
throughout  the  whole  of  their  dealing  with  the  matters  involved 
in  this  controversy.  Whatever  may  have  been  their  true  mo- 
tives of  action,  the  facts  disclosed  in  evidence  do  not  demand 
that  we  should  brand  them  as  willfully  dishonest.  One  of  the 
most  distinctive  features  in  the  history  of  the  development  of 
the  mineral  regions  of  our  state,  has  been  the  insane  spirit  of 


94       HOFFMAN  COAL  CO.  v.  CUMBERLAND  CO., 

speculation  which  has  characterized  it  at  almost  every  step. 
Honest  men,  as  well  as  dishonest  men,  uninfluenced  by  the  dis- 
astrous failures  of  their  predecessors,  have  from  time  to  time 
embarked  in  enterprises,  under  the  delusive  hope  of  speedily, 
and  as  it  were  by  magic,  realizing  princely  fortunes,  and  have 
only  been  awakened  to  a  sense  of  the  unreality  of  their  calcula- 
tions and  hopes  by  the  crash  occasioned  by  their  utter  prostra- 
tion and  ruin.  This  spirit  of  wild  speculation  ordinarily  blinds 
those  who  are  engaged  in  it,  and  subjects  them  to  the  condition 
in  which  they  are  unable  to  see  things  as  others  see  them. 
Legal  disabilities  rarely  occur  to  them ;  it  being,  with  most  of 
them,  an  axiom  of  public  or  political  economy,  that  the  ex- 
change of  one  article  for  another,  at  fictitious  rates,  and  without 
the  bestowal  of  labor  on  either,  inci*eases  the  value  of  both. 
Men  involved  in  transactions  of  this  kind  very  frequently,  with- 
out the  slightest  consciousness  of  dishonesty  of  purpose,  do 
things  which  the  law  condemns,  and  which  it  declares  to  be 
of  no  value.  -  It  is  to  guard  against  this  proneness  to  a  non- 
observance  of  what  is  strictly  right  and  proper  in  the  dealings 
of  corporations,  the  law  has  wisely  interposed  its  checks  and 
prohibitions ;  and  we  think,  in  the  present  aspect  of  this  case, 
these  are  all  sufficient  to  justify  the  action  of  the  Circuit  Court, 
without  staining  the  reputation  of  any  of  the  parties  to  the  con- 
troversy with  fraud  or  perjury.  Uprightness  and  integrity  of 
character  are  too  precious  a  possession  to  be  dealt  with  lightly 
anywhere,  and  ought  not  especially  to  be  sullied  by  the  judgment 
of  a  court  of  justice,  except  on  clear  and  conclusive  evidence. 

The  first  matter  of  inquiry  is,  the  nature  and  legal  effect 
of  the  transactions  of  Sherman  with  the  Cumberland  Coal  and 
Iron  Company.  The  whole  evidence  incontestably  establishes 
these  facts : 

1.  That  Sherman  was  a   director  of  the   Cumberland   Coal 
and  Iron  Company,  from   the   21st  of  February,  1855,  to  the 
29th  of  May,  1858. 

2.  That  on  the  9th  of  October,  1855,  on  motion  of  Sherman, 
a  committee  was  appointed  to  visit  the  lands  of  the  company  in 
Maryland,  and  report  on  the  expediency  of  selling  a  portion  of 
them,  and  of  which  committee  he  acted  as  chairman,  and  as  the 
organ  of  which  he  recommended  a  sale,  etc. 


IN  THE  MARYLAND  COURT  OF  APPEALS.  95 

3.  That  on  the  22d  of  April,  1856,  Sherman  received  the 
deed  to  himself  and  Dean  for  the  land,  and  the  contract  relating 
to  the  transportation  over  the  railroad  of  complainant. 

It  thus  appears  that  Sherman  was  a  director  in  the  Cumber- 
land Coal  and  Iron  Company  from  the  incipiency  of  the  project 
to  dispose  of  a  part  of  its  property  down  to  its  consummation, 
and  so  remained  for  more  than  two  years  thereafter.  He  act- 
ively participated  in  all  measures  tending  to  the  completion  of 
the  sale,  and  of  course  had  full  knowledge  of  all  the  circum- 
stances attendant  on  its  progress.  About  this  the  documentary 
proof  allows  of  not  a  shadow  of  doubt.  Under  this  state  of  case 
the  question  is,  whether  Sherman  was  competent  to  become  a 
purchaser  of  the  property  of  the  plaintiff. 

In  considering  the  capacities  of  a  trustee  to  purchase  the 
property  of  his  cestui  que  trust,  the  authorities  regard  them  un- 
der two  classifications :  first,  where  a  trustee  buys  or  contracts 
with  himself,  or  several  trustees,  of  which  he  is  one,  or  a  board 
of  trustees ;  second,  where  the  dealing  of  the  trustee  is  with  a 
cestui  que  trust,  who  sui  juris,  and  competent  to  deal  independ- 
ently of  the  trustee  in  respect  to  the  trust  estate. 

Whether  the  transactions  of  Sherman  be  considered  under  the 
one  or  the  other  head,  is  immaterial  so  far  as  this  appeal  is  con- 
cei'ned;  for  in  our  judgment,  in  either  case,  they  can  not  be 
upheld,  if  resisted.  The  distinction  between  the  two  classes  of 
cases  consists  in  this  :  that  in  the  first,  the  contract  is  voidable 
absolutely,  at  the  instance  of  the  cestui  que  trust,  without  regard 
to  its  fairness ;  while  in  the  second,  although  the  presumptions 
of  the  law  are  against  the  contract,  yet  permission  is  given  to 
the  trustee  to  show  the  perfect  bona  fides  of  the  transactions 
and  circumstances  relieving  it  from  the  censure  of  the  law. 
This  is  a  distinction  recognized  in  most  of  the  books,  but  it  is 
not  universally  so.  So  far  from  it,  some  of  the  cases  insist,  with 
great  earnestness,  that  the  governing  principle  ought  to  be,  and 
is,  the  same  in  both  cases.  It  is  not  necessary  we  should  inves- 
tigate the  solidity  of  this  last-mentioned  doctrine ;  for,  whether 
the  dealings  of  Sherman  belong  to  the  one  or  the  other  class, 
they  equally  fall  under  the  correction  of  a  court  of  equity. 

The  necessity  of  good  faith — and  that  free  from  suspicion,  as 
far  as  practicable — between  the  principal  and  agent,  is  the  main 


96       HOFFMAN  COAL  CO.  v.  CUMBERLAND  CO., 

pillar  of  support  to  the  doctrine.  The  necessity  of  it  underlies 
all  the  decisions.  Remembering  the  weakness  of  humanity,  its 
liability  to  be  seduced,  by  self-interest,  from  the  straight  line  of 
duty,  the  sages  of  the  law  inculcate  and  enjoin  a  strict  observ- 
ance of  the  Divine  precept,  "  Lead  us  not  into  temptation." 

In  this  state,  as  elsewhere,  it  is  Hvell  settled  that  trustees  can 
not  purchase  at  their  own  sales,  either  directly  or  indirectly  ; 
and  if  they  do,  such  purchase  will  be  set  aside,  on  the  proper 
and  reasonable  application  of  the  parties  interested.  Richardson 
v.  Jones,  3  Gill  and  Johnson,  184.  This  doctrine,  which  is  ap- 
plicable to  trustees,  applies  also  to  purchases  by  persons  acting 
in  any  fiduciary  capacity  which  imposes  upon  them  the  obliga- 
tion of  obtaining  the  best  terms  for  the  vendor,  or  which  has 
enabled  them  to  acquire  a  knowledge  of  the  property.  The 
authorities  supporting  it  are  numerous  and  uncbntradictory. 
They  will  be  found  brought  together,  to  a  considerable  number, 
in  the  notes  to  the  case  of  Fox  v.  Mackrcth,  1  White  and  Tudor's 
Leading  Equity  Cases,  105.  A  director  in  a  company  holds  such 
a  relation  to  its  stockholders.  The  House  of  Lords,  in  the  case 
of  the  Aberdeen  Railway  Company  v.  Blaikie,  1  M'Queen,  461, 
held  that  a  contract,  entered  into  by  a  manufacturer  for  the 
supply  of  iron  furnishings  to  a  railway  company,  of  which  he 
was  a  director,  or  the  chairman,  at  the  date  of  the  contract,  was 
invalid,  and  not  enforceable  against  the  company ;  and  Lord 
CRANWOUTII,  in  delivering  the  opinion,  said:  "A  corporate 
body  can  only  act  by  agents,  and  it  is  of  course  the  duty  of 
those  agents  so  to  act  as  best  to  promote  the  interests  of  the 
corporation  whose  affairs  they  are  conducting.  Such  an  agent 
has  duties  to  discharge  of  a  fiduciary  character  toward  his  prin- 
cipal ;  and  it  is  a  rule  of  universal  application,  that  no  one  having 
such  duties  to  discharge,  shall  be  allowed  to  enter  into  engage- 
ments in  which  he  has,  or  can  have,  a  personal  interest  conflict- 
ing, or  which  possibly  may  conflict,  with  the  interests  of  those 
whom  he  is  bound  to  protect.  So  strictly  is  this  principle  ad- 
hered to,  that  no  question  is  allowed  to  be  raised  as  to  the  fair- 
ness or  unfairness  of  a  contract  so  entered  into.  It  obviously  is, 
or  may  be,  impossible  to  demonstrate  how  far,  in  any  particular 
case,  the  terms  of  such  a  contract  have  been  the  best  for  tlie 
cestui  quo  trust  which  it  was  possible  to  obtain.  It  may  some- 


IN  THE  MARYLAND  COURT  OF  APPEALS.  97 

times  happen  that  the  terms  on  which  a  trustee  has  dealt,  or  at- 
tempted to  deal,  with  the  estate  or  interests  of  those  for  whom 
he  is  a  trustee,  have  been  as  good  as  could  have  been  obtained 
from  any  other  person ;  they  may  even,  at  the  time,  have  been 
better.  But  still,  so  inflexible  is  the  rule  that  no  inquiry  on 
that  subject  is  permitted.  The  English  authorities  on  this  sub- 
ject are  numerous  and  uniform."  The  same  views  are  expressed 
in  the  case  of  Michoud  v.  Girod,  4  Howard,  503,  a  case  elabo- 
rately discussed  by  counsel  and  court.  u  The  rule,"  say  the 
court,  "  embraces  every  relation  in  which  there  may  arise  a 
conflict  between  the  duty  which  the  vendor  or  purchaser  owes  to 
the  persons  with  whom  he  is  dealing,  or  on  whose  account  he  is 
acting,  and  his  own  individual  interest." 

These  citations  are  sufficient  to  show,  that  the  dealings  of 
the  defendant  Sherman  with  the  property  of  the  complainant, 
fall  directly  within  the  prohibition  of  the  rule,  and  as  a  conse- 
quence, obnoxious  to  disavowal. 

But  it  is  said,  however  this  may  be,  the  whole  transaction 
was  fully  ratified  and  confirmed  by  the  complainant,  which  rati- 
fication and  confirmation  relieved  it  from  all  legal  infirmity.  An 
attentive  consideration  of  its  whole  history,  as  detailed  in  the 
record,  has  not  brought  us  to  this  opinion.  The  law  governing 
questions  of  ratification  in  cases  like  the  present,  is  well  settled. 
To  render  the  act  of  ratification  effective  and  conclusive,  certain 
considerations  are  necessary.  At  the  time  of  the  supposed  rati- 
fication, the  principal  must  have  been  fully  aware  of  every  ma- 
terial circumstance  of  the  transaction,  the  real  value  of  the 
subject  of  the  contract,  and  his  act  of  ratification  must  have 
been  an  independent  and  substantive  act,  founded  on  complete 
information,  and  of  perfect  freedom  of  volition.  And,  in  addi- 
tion to  all  this,  the  cestui  que  trust  must  not  only  have  been 
acquainted  with  the  facts,  but  apprized  of  the  law,  how  those 
facts  would  be  dealt  with  if  brought  before  a  court  of  equity. 
Lewen  on  Trusts  (ed.  of  1858),  615. 

This  last  requisite,  it  is  nowhere  shown  in  the  proof,  has 
been  complied  with.  But,  on  the  contrary,  it  is  fairly  to  be  in- 
ferred that  the  stockholders  believed  they  were  concluded  by 
what  had  been  done,  and  this  inference  is  particularly  strength- 
ened by  the  circumstance  that  the  modification  in  the  contract 

7 


98       HOFFMAN  COAL  CO.  v.  CUMBERLAND  CO., 

of  transportation  was  solicited  and  granted,  not  as  a  matter  of 
right,  but  as  a  concession  on  the  part  of  the  beneficiaries  under 
it.  In  this  view,  it  is  not  necessary  we  should  dwell  more  fully 
on  the  other  facts  attending  the  negotiation  and  sale.  Such 
commentary  properly  belongs  to  the  final  hearing  (a). 

(o)  WHAT  is  A  CONFIRMATION  OR  RATIFICATION  BY  THE  BENEFICIARY? — 
Judge  DAY  IKS,  in  Cumberland  Coal  Company  v.  Sherman,  30  Barbour,  574,  after 
considering  the  circumstances  of  the  case,  says: 

"I  can  not  therefore,  upon  these  facts  and  principles,  say  that  this  sale  can 
be  upheld,  even  if  it  had  been  made  by  the  cestuis  que  trust  directly.  But  it  is 
safd  that  the  stockholders,  at  the  meeting  of  June,  1857,  ratified  and  confirmed 
the  sale  and  contract.  It.  must  be  borne  in  mind  that  at  this  meeting  the  stock- 
holders were  dealing  with  their  trustee,  and  that  all  the  duties  incumbent  on 
him,  when  negotiating  a  purchase  from  his  cestui  que  trust,  devolved  with  equal 
force  on  him  when  seeking  a  ratification  of  a  sale  made  to  him  by  himself  as  a 
trustee,  with  the  aid  of  his  co-trustees.  I  am  now  regarding  the  law  as  appli- 
cable to  a  ratification  made  by  stockholders  themselves,  or  a  majority  of  them.  I 
shall  hereafter  consider  whether  a  majority  of  the  stockholders  made  such  ratifi- 
cation, and  whether  it  was  competent  for  the  majority  to  make  the  same,  or  to 
bind  the  minority.  The  rules  as  to  confirmation  of  a  sale  to  a  trustee  by  the 
ceslui  que  trust,  are  concisely  laid  down  in  Lewin  on  Trusts,  97  Law  Lib.  402. 
They  are:  '1.  The  confirming  party  must  be  tui  juris,  not  laboring  under  any  dis- 
ability, as  infancy  or  coverture.  2.  The  confirmation  must  be  a  solemn  and  de- 
liberative act — not,  for  instance,  fished  out  from  some  expressions  in  a  letter; 
and  particularly  when  the  original  transaction  was  infected  with  fraud,  the  con- 
firmation of  it  is  so  inconsistent  with  justice,  and  so  likely  to  be  accompanied 
with  imposition,  that  the  court  will  watch  it  with  the  utmost  strictness,  and  not 
allow  it  to  stand  but  on  the  very  clearest  evidence.  3.  There  must  be  no  sup- 
pressio  vert,  or  suggestio  falsi,  but  the  cestui  que  trust  must  be  honestly  made  ac- 
quainted with  all  the  material  circumstances  of  the  case.  4.  The  confirming 
party  must  not  be  ignorant  of  the  law;  that  is,  he  must  be  aware  that  the  trans- 
action is  of  such  a  character  that  he  could  impeach  it  in  a  court  of  equity.  5.  The 
confirmation  must  be  wholly  distinct  from,  and  independent  of,  the  original  con- 
tract— not  a  conveyance  of  the  estate,  executed  in  pursuance  of  a  covenant  in 
the  original  deed  for  further  assurance.  6.  The  confirmation  must  not  be  wrung 
from  the  cestui  que  trust  by  distress  or  terror.  7.  When  the  cestuis  que  trust  are  a 
class  of  persons,  as  creditors,  the  sanction  of  the  major  part  will  not  be  obligatory 
on  the  rest;  but  the  confirmation,  to  be  complete,  must  be  the  joint  act  of  the  whole 
body.'  All  these  positions  are  sustained  by  numerous  authorities,  and  are  believed 
to  be  sound  law,  and  of  universal  recognition. 

"Applying  these  principles  to  the  present  case,  has  the  party  seeking  the 
confirmation  of  the  stockholders  to  this  sale  and  contract  shown  that  these  essen- 
tial prerequisites  have  been  complied  with  on  his  part?  I  do  not  understand  it 
to  be  pretended  that  all  the  facts  and  circumstances  of  the  case  were  made  known 
to  the  stockholders  at  this  time.  It  is  not  asserted  that  the  statement  made  by 
Mehaffey  to  the  stockholders,  at  their  meeting  in  June,  1856,  that  the  whole  con- 
sideration of  this  sale,  $140,000.  had  been  paid  in  money,  and  that  $112,000 


IN  THE  MARYLAND  COURT  OF  APPEALS.  99 

As  to  Dean,  it  is  only  necessary  to  observe,  that  it  is  impos- 
sible to  believe  he  was  ignorant,  when  he  became  associated  in 
the  transaction,  of  the  fact  that  Sherman  was  a  director  in  the 
Cumberland  Coal  and  Iron  Company.  We  can  not  suppose  him 
to  have  become  a  party  to  a  contract,  involving  enormous  sums 

thereof  had  been  applied  in  the  extinguishing  of  that  amount  of  bonds  of  the 
plaintiff,  and  which  was  undeniably  incorrect,  and  well  calculated  to  deceive  and 
impose  on  the  stockholders,  was  in  fact  untrue,  and  they  so  understood  it.  Can 
I  assume  that  the  defendant  Sherman  was  ignorant  of  this  report,  and  this  in- 
correct statement?  If  he  had  knowledge  of  them,  it  was  clearly  his  duty,  when 
he  sought  the  stockholders  to  obtain  from  them  a  confirmation  of  this  sale,  to 
have  made  them  acquainted  with  the  material  facts  as  they  truly  existed.  Not 
having  done  so,  it  was  a  suppressio  veri;  and,  whether  made  designedly  or  not,  is 
equally  fatal,  and  the  confirmation,  if  obtained,  will  not  avail  him.  The  confir- 
mation must  not  have  been  made  in  pursuance  of  the  original  transaction,  or  under 
the  influence  of  that  transaction,  Wood  v.  Dowries,  18  Vesey,  125;  or  under  the 
same  state  of  circumstances  which  produced  that  transaction,  Crowe  v.  Bollard,  1 
Id.  215.  A  confirmation  given  under  the  idea  that  the  original  transaction  was 
valid,  when  it  was  not,  will  be  set  aside,  Roche  v.  O Brim,  1  Ball  &  Beat.  338; 
Oowland  v.  De  Taria,  17  Vesey,  18;  Dunbar  v.  Frederick,  2  Ball  &  Beat.  317. 

"It  is  very  doubtful,  I  think,  whether  the  confirmation  or  ratification  of  June, 
1857,  if  made  with  all  the  conditions  and  under  all  the  circumstances  required, 
was  an  act  either  of  the  corporation  or  of  the  stockholders.  To  make  it  binding 
on  the  former,  there  must  have  been,  according  to  the  charter,  a  quorum  of  the 
stockholders;  and  in  corporations -having  stock,  each  share  is  deemed  a  stock- 
holdei',  and  a  majority  of  shares  present  or  represented  is  a  majority  of  the  stock- 
holders. A  very  large  proportion  of  stockholders  represented  at  that  meeting 
were  there  by  attorney,  and  the  power  given  only  authorized  them  to  vote  for  the 
election  of  directors.  It  did  not  authorize  them  to  bind  their  principals  to  acts, 
and  in  reference  to  matters,  not  authorized  or  assumed  by  the  power.  The  rati- 
fication or  confirmation  by  such  attorneys  or  agents,  having  no  power  to  act.  in 
the  premises,  neither  bound  the  corporation  nor  the  stockholders  for  whom  they 
thus,  without  any  authority,  assumed  to  act. 

"But  even  if  the  confirmation  had  been  legally  made,  and  by  a  majority  of 
the  stockholders,  which  it  clearly  was  not,  when  as  in  this  case,  it  was  to  be  made 
by  a  class,  the  sanction  of  a  major  part  will  not  be  obligatory  on  the  rest ;  but  the 
confirmation,  to  be  complete,  must  be  the  joint  act  of  the  whole  body.  Ex  parte 
Hughes,  6  Vesey,  622;  ex  parte  Laccy,  Id.  628;  ex  parte  James,  8  Id.  337;  Davoue  v. 
Fanning,  2  Johns.  Ch.  264. 

"At  the  meeting  of  June,  1857,  certain  stipulations  of  the  transportation 
contracts  were  relinquished  by  the  defendant  Sherman,  and  it  is  contended  that 
the  acceptance  of  this  release  bound  the  corporation  and  the  stockholders  to  the 
contracts,  and  operated  as  a  ratification  of  the  same.  What  would  have  been  its 
effect  had  the  defendant  Sherman  stood  in  the  attitude  of  a  stranger  to  the 
plaintiffs  and  the  stockholders,  it  is  not  necessary  to  determine.  But  in  view  of 
their  actual  relations,  and  in  accordance  with  the  principles  above  stated,  as  ap- 
plicable to  confirmations  in  such  cases,  it  can  have  no  binding  effect.  Shei-man, 
in  his  affidavit,  speaks  of  the  release  proposed  to  be  given,  as  'his  concession  or 


100      HOFFMAN  COAL  CO.  v.  CUMBERLAND  CO., 

of  money  and  great  liabilities,  without  some  knowledge  of  the 
existence  and  organization  of  the  corporation  with  which  he  was 
dealing  to  so  great  an  extent.  Imputing  to  him  the  possession 
,of  ordinary  intelligence,  and  judging  of  his  transactions  by  the 
rules  which  usually  influence  human  conduct,  when  taken  in 

consent  to  modify'  the  original  transaction.  He  also  says  that  when  Grosvenor, 
one  of  the  stockholders,  questioned  the  transaction,  he  (Grosvenor)  admitted  that 
the  plaintiffs  'had  no  claim  on  said  Sherman  and  Dean  to  change  or  modify  said 
agreement.  .  .  .  And  thereupon  Sherman  consented  to  make  said  mod- 
ification.' Mehaffey  swears  that  'he  did  not  contemplate'  the  subject  coming  up 
at  the  stockholders'  meeting  in  June,  1857;  that  'on  the  contrary  he  regarded  it 
as  having  been  definitely  settled,  approved  of,  and  ratified  by  the  stockholders;' 
that  it  was  bought  up  by  Grosvenor;  'that  said  Grosvenor  observed  that  whilst 
the  stockholders  had  no  claim,  and  could  not  claim  it  as  a  right,  that  Sherman 
and  Dean  should  modify  said  contract,'  etc.  Riley,  a  stockholder,  who  attended  the 
meeting  in  June,  1857,  says  that  he  was  not  aware,  nor  does  he  believe  that  any 
of  the  stockholders  were  aware,  of  their  legal  rights,  or  that  tltcy  had  any  claim 
to  have  the  deed  and  contracts,  to  use  his  own  expression,  'ripped  up;'  that  no 
resolution  was  passed  or  offered  at  said  meeting  approving  said  contracts 
and  sale. 

"It  is  very  apparent  that  no  actual  ratification  or  confirmation  took  place, 
and  I  am  unable  to  see  that  any  thing  was  done  which  would  authorize  one  to 
be  implied.  Even  if  obtained,  Sherman  was  dealing  with  his  cestuis  que  trust, 
and  standing  on  the  original  transaction,  claiming  its  validity  and  binding 
character;  and  his  cestuia  que  trust  believing  it  so  to  be,  he  is  debarred,  on  the 
authority  of  the  cases  already  cited,  from  claiming  any  benefits  from  such  con- 
firmation, even  if  it  had  been  made  as  distinctly  and  unequivocally  as  he 
pretends. 

"After  a  most  patient  investigation  of  the  facts  in  this  case,  and  the  numer- 
ous authorities  cited  in  the  protracted  and  very  able  arguments  made  by  the 
learned  counsel  for  the  respective  parties  in  this  cause,  I  have  arrived  at  the  con- 
clusion, entirely  clear  to  my  own  mind,  that  this  deed  of  sale  and  contract  can 
not  be  sustained.  To  hold  otherwise,  would  be  to  overturn  principles  of  equity 
which  have  been  regarded  as  well  settled  since  the  days  of  Lord  Keeper  BRIDGE- 
MAN,  in  the  22d  of  Charles'II,  to  the  present  time — principles  enunciated  and  en- 
forced by  HARDWICKE,  THURLOW,  LOUGHBOROUOH,  ELDON,  CRANWORTH,  STORY, 
and  KENT,  and  which  the  highest  courts  in  our  country  have  declared  to  be 
founded  on  immutable  truth  and  justice,  and  to  stand  upon  our  great  moral  obli- 
gation to  refrain  from  placing  ourselves  in  relations  which  excite  a  conflict  be- 
tween self-interest  and  integrity. 

"I  have  arrived  at  this  result  without  considering  the  question  of  fraud 
raised  in  the  complaint,  and  denied  by  the  answering  affidavits.  I  have  chosen 
to  place  my  decision  on  higher  and  more  satisfactory  grounds.  I  adopt  the  lan- 
guage of  Lord  ELDON,  in  ex  parte  James,  8  Vesey,  345 :  '  It  rests  upon  this,  that 
the  purchase  is  not  permitted  in  any  case,  however  honest  the  circumstances,  the 
general  interests  of  justice  requiring  it  to  be  destroyed  in  every  instance,  as 
no  court  is  equal  to  the  examination  and  ascertainment  of  the  truth,  in  much  the 
greater  number  of  cases.'  There  may  be  fraud,  as  Lord  HARDWICKE  observed, 


IN  THE  MARYLAND  COURT  OF  APPEALS.  101 

connection  with  all  the  facts  and  circumstances  surrounding  him, 
we  are  led  to  the  conclusion  that  he  had  knowledge  of  the  rela- 
tion which  Sherman  bore  to  the  Coal  and  Iron  Company,  and  is, 
therefore,  affected  with  whatever  of  legal  disability  belonged  to 
Sherman,  by  reason  of  that  relation. 

But  it  is  urged  that  however  defective  the  title  of  Sherman 
and  Dean  may,  under  the  circumstances,  have  been,  the  title  of 
the  Hoffman  Steam  Coal  Company  of  Alleghany  is,  nevertheless, 
good  and  free  from  blemish,  it  having  been  acquired  bona  fide 
and  without  notice. 

In  view  of  the  facts  of  tliis  case,  it  is  immaterial  to  inquire 
what  would  be  the  principles  applicable  to  a  case  in  which 
the  defendant  had,  in  point  of  fact,  become  possessed  of  title 
lona  fide,  and  without  notice  of  the  circumstances  impairing  that 
claimed  by  those  from  whom  it  was  derived.  The  facts  of  this 
case  are  too  palpable  to  allow  of  conjecture,  and  they  all  show 
that,  whatever  knowledge  Sherman  had  must  have  been  pos- 
sessed by  the  Hoffman  Steam  Coal  Company  of  Alleghany 

and  the  party  not  be  able  to  prove  it.  To  quote  Chancellor  KENT:  'It  is  to  guard 
against  this  uncertainty  and  hazard  of  abuse,  and  to  remove  the  trustee  from 
temptation,  that  the  rule  does  and  will  permit  the  cestui  que  trust  to  come  at  his 
own  option,  and  without  showing  any  actual  injury,  insist  upon  the  experiment 
of  a  resale.  This  is  a  remedy  which  goes  deep,  and  touches  the  very  root  of  the 
evil.  It  is  one  that  appears  to  me,  from  the  cases  which  have  been  already  cited, 
and  from  those  which  are  to  follow,  to  be  most  conclusively  established.'  The 
trustee  purchased  with  this  clog  upon  his  title,  and  with  a  knowledge  that  his 
cestui  que  trust  might,  at  his  option,  in  the  absence  of  all  fraud,  apply  within  a 
reasonable  time  to  have  the  sale  vacated. 

"For  the  reasons  herein  stated,  I  have  no  doubt  such  are  the  rights  of  the 
present  cestui  que  trust,  the  plaintiff  in  this  suit,  and  it  having  established  a 
prima  facie  right  to  have  the  deed  and  contracts  canceled,  and  the  lands  sold  rccon- 
veyed  to  them,  it  is  my  duty  to  restrain  the  defendants  until  the  hearing  of  this 
cause,  as  asked  for  in  the  complaint  and  supplemental  complaint. 

"The  plaintiff  has  the  right  to  its  real  estate,  or  any  thing  into  which  it  has 
been  transmuted.  It  is  therefore  proper  to  restrain  the  defendants  from  trans- 
ferring the  stock  owned  by  them  in  the  Hoffman  Coal  Company,  which  but 
represents  the  real  estate  of  the  plaintiff,  and  the  privileges  and  advantages  se- 
cured by  the  transportation  contract. 

"The  motion  for  an  injunction  is  therefore  granted." 

See  further  as  to  election  or  confirmation,  Fillansbe  v.  Kilbreth,  17  Illinois. 
523,  hereinafter  reproduced,  with  the  notes  thereto  appended.  See  also  note  to 
Oliver  v.  Piatt,  preceding,  page  38,  and  same  to  York  and  North  Midland  Railway 
Company  vt  Hudson,  preceding,  page  72. 


102       HOFFMAN  COAL  CO.  v.  CUMBERLAND  CO. 

County.  This  company  was  incorporated  under  the  act  of  1852, 
on  the  19th  of  August,  1858,  and  on  the  day  following,  the  deed 
was  made  to  it  in  pursuance  clearly  of  one  entire  plan,  Sherman 
and  Dean  becoming  the  owners  of  4,996  of  the  5,000  shares 
into  which  the  capital  stock  was  divided ;  it  was,  in  fact,  but  a 
contrivance,  whereby  the  same  property  was  held  by  the  same 
parties,  but  under  a  different  name.  The  testimony  of  Shoe- 
maker shows,  that  his  ownership  of  one  share  was  unreal ;  that 
he  never  did  pay  for  it,  and  that  his  participation  in  the  organ- 
ization of  the  company  was  merely  to  oblige  other  parties,  toward 
whom  he  held  friendly  relations ;  and  notwithstanding  the  state- 
ment of  Postly  to  the  contrary,  it  is  no  violent  presumption  that 
others,  whose  names  were  used  in  the  organization  of  the  com- 
pany, occupied  the  same  relation  to  it  as  did  Shoemaker.  If  the 
facts  of  this  case  were  deemed  insufficient  to  establish  notice,  then 
it  is  difficult,  if  not  absolutely  impossible,  to  imagine  a  combina- 
tion of  circumstances  adequate  to  such  a  result.  The  whole  case 
shows  that,  in  the  early  stages  of  the  existence  of  the  appellant, 
so  far  as  its  property  and  transactions  were  concerned,  it  and 
Sherman  were  one  and  the  same.  In  conveying  to  the  Hoffman 
Company,  he  was  but  conveying  to  himself. 

It  appears  from  the  evidence,  that  some  of  the  shares  in  the 
stock  of  the  Hoffman  Steam  Coal  Company  were  held  by  other 
persons  than  Sherman  and  Dean  prior  to  the  6th  day  of  De- 
cember, 1858,  the  date  of  the  filing  of  the  original  bill,  and  it  is 
contended,  that  as  to  them,  they  being  bona  fide  holders  without 
notice,  the  objectioijs  urged  against  Sherman  and  Dean  are  not 
applicable.  There  is  no  doubt  that  where  a  purchaser,  with  no- 
tice from  a  trustee,  conveys  for  valuable  consideration  to  another 
person,  who  has  no  notice  of  the  trust,  the  estate  will  not  be  af- 
fected with  the  trust  in  the  hands  of  the  second  purchaser,  Hill 
on  Trustees,  516  (marginal).  But  as  to  shareholders  so  situated, 
there  is  no  question  presented  by  this  appeal.  It  is  only  as  to 
the  right  of  the  appellant  to  ask  a  reversal  of  the  order  of  the 
court,  that  we  are  now  called  upon  to  decide.  We  need  not, 
therefore,  look  into  the  testimony  for  the  purpose  of  discovering 
what  number,  if  any,  shares  of  stock  were  held  by  innocent 
parties  before  the  filing  of  the  bill. 

We   think  the  objections  to  the  sufficiency  of  the  bills  of 


DAVID  C.  MURREY,  ETC.,  v.  VANDERBILT.      'l  -103 


complainant  were  properly  disposed  of  by  the  judge  of  the  Cir- 
cuit Court.  The  charge  of  fraud  is  made  specifically,  and  the 
invalidity  of  the  deeds  given  subsequently  to  that  of  the  22d  of 
April,  1856,  is  assailed  on  the  same  ground  as  is  that. 

We  are  of  opinion  there  is  an  abundance  in  the  case,  as  now 
made,  to  justify  the  continuance  of  the  injunction  until  final 
hearing,  and  we  accordingly  affirm  the  orders  of  the  Circuit 
Court,  of  the  25th  day  of  May,  1859,  refusing  to  dissolve  the 
injunction,  and  also  the  order  of  the  3d  day  of  October,  1859, 
overruling  the  motion,  made  by  the  appellant,  to  dissolve  the 
injunction.  ORDERS  AFFIRMED. 

ECCLESTON,  J.,  delivered  the  following  opinion  :  Without 
deciding  whether,  at  the  time  Dean  became  first  associated  in 
the  transaction  mentioned  in  the  proceedings,  he  was  or  was  not 
ignorant  of  the  fact  that  Sherman  was  a  director  in  the  Cum- 
berland Coal  and  Iron  Company,  I  think  there  is  enough  shown 
by  this  record  to  authorize  the  Court,  in  the  exercise  of  its 
equitable  discretion  with  regard  to  the  dissolution  of  injunctions, 
to  continue  the  present  injunction  until  the  final  hearing.  And 
therefore  I  concur  with  my  brothers  in  affirming  the  orders 
appealed  from. 


DAVID  C.  MURREY,  RECEIVER,  ETC.,  v.  CORNELIUS 
VANDERBILT. 

{Decided  in  the  Supreme  Court  of  the  State  of  New  York,  in  1863, 
Jiistice  DANIEL  P.  INGRAHAM  delivering  the  opinion  of  the  Court.  Re- 
ported in  39  Barbour,  140.] 

An  agreement  was  made  between  the  Pacific  Mail  Steamship  Company  and  the 
Accessory  Transit  Company,  by  which  the  former  company  was  to  pay  to 
the  latter  a  certain  sum  per  trip  or  per  month,  so  long  as  the  boats  of  the 
Pacific  Company  should  run  without  opposition.  Held,  that  in  an  action 
brought  by  the  Transit  Company  against  the  Pacific  Company,  although  the 
contract  was  immoral  and  in  restraint  of  trade  and  commerce,  the  Court 
would  not  enforce  it  against  the  delinquent  party,  or,  if  the  money  had 
been  paid,  enable  the  party  paying  to  recover  it  back,  but  would  leave  the 
parties  as  the  law  found  them,  both  being  in  pari  delicto.  Yet,  that  the  rule 


104  DAVID  C.  MURREY,  ETC.,  v.  VANDERBILT. 

did  not  apply  to  an  action  by  one  of  the  principals  in  such  a  contract 
agninst  its  agent  who  had  received  money  thereon. 

Money  having  been  paid  voluntarily  to  an  agent  for  his  principal,  by  a  party 
who  could  not  have  been  compelled  to  make  such  payment,  it  becomes  the 
property  of  the  principal  in  the  agent's  hands,  for  which  the  agent  should 
account.  He  has  no  right  to  refuse  payment  to  his  principal,  because  the 
latter  had  not  a  legal  claim  to  the  money  paid. 

An  agent  has  no  right  to  dispute  the  title  of  his  principal  to  moneys  received  by 
him  for  the  use  of  the  principal.  Nor  can  he  resist  an  action  for  the  amount 
so  received,  on  the  ground  that  the  money  was  paid  on  an  illegal  contract 
between  the  original  parties. 

After  a  corporation  has  virtually  ceased  to  exist,  and  for  all  purposes  of  business 
and  for  promoting  the  objects  of  the  charter,  all  its  powers  have  been  taken 
away,  its  property  all  expended,  and  the  company  is  hopelessly  insolvent, 
it  is  not  improper  for  the  president  of  the  company  to  enter  into  arrangements 
on  his  own  behalf  for  carrying  on  and  continuing  for  his  own  benefit,  the 
business  formerly  conducted  by  the  company  under  an  agreement  not  impos- 
ing any  duty  or  obligation  upon  the  corporation,  or  involving  any  use  of  its 
property. 

The  being  president  of  an  insolvent  corporation  will  not  prevent  one  from  doing 
what  the  corporation  has  lost  all  ability  to  do.  After  the  company  has  vir- 
tually ceased  to  exist,  and  its  powers  have  been  taken  away,  the  renson  and 
policy  of  the  rule  prohibiting  a  trustee  from  making  agreements  for  his  own 
benefit  ceases  also.  Where  the  president  of  a  corporation,  holding  a  mort- 
gage upon  vessels  of  the  corporation,  given  to  secure  him  for  advances 
made,  and  for  bonds  of  the  company  held  by  him,  and  authorized  by  the 
company  to  sell  the  vessels,  ns  its  agent,  sold  the  same  at  private  sale  to  his 
son,  taking  his  note  for  the  purchase  money,  payable  in  a  year,  he  still 
keeping  the  control  and  management  of  the  vessels  and  rendering  no  account 
to  the  purchaser  for  the  use  of  them ;  held,  that  such  a  transaction  could  not 
be  upheld,  and  the  sale  was  ordered  to  be  set  asiilc,  and  the  agent  directed 
to  account  to  the  company  for  the  proceeds  of  the  vessels,  when  subsequently 
Bold  by  him. 

A.  J.  ParJcer,  Henry  A.  Cram,  and  John  Shertvood,  for  the 
plaintiff.  //.  F.  Clark,  C.  O'Connor,  David  Lord,  and  Clias.  A. 
Rapallo,  for  defendant. 

/  / 

INGRAHAM,  J.  This  action  is  brought  by  the  plaintiff,  as 
receiver,  appointed  in  various  actions  against  the  Accessary 
Transit  Company  for  the  collection  of  debts  due  from  the  com- 
pany. [Points  of  practice,  and  other  matters,  aside  from  the 
trust  sought  to  be  charged  upon  the  defendant  in  this  case,  are 
omitted.  The  principal  point  under  immediate  consideration 
arose  under  the  agreement  between  the  two  steamship  companies 
by  which  the  Pacific  was  to  pay  the  Transit  Company,  $10,000 
per  trip,  while  the  former  had  no  opposition  on  their  line  of  steam- 


IN  THE  SUPREME  COURT  OF  NEW  YORK.  105 

ships.  The  claim  of  the  receiver,  arising  thereunder,  that  the 
defendant  was  chargeable  as  trustee,  and  could  not  make  a  con- 
tract for  his  individual  benefit  while  an  officer  of  the  Transit 
Company,  together  with  the  testimony  bearing  thereon,  will  be 
understood  in  what  follows  of  the  opinion  of  the  Court.] 

An  objection  is'  taken  to  this  claim,  on  the  ground  that  the 
contract  was  immoral  and  could  not  be  enforced  ;  that,  being  in 
restraint  of  trade  and  commerce,  the  Court  should  not  sustain  it, 
but  should  leave  the  parties  as  the  law  found  them,  both  being  in 
pari  delicto.  That  this  rule  would  apply  if  the  action  was  brought 
by  the  plaintiff  or  by  Vanderbilt  against  the  Pacific  Mail  Steam- 
ship Company,  I  have  no  doubt.  The  law  would  not  enforce 
such  a  contract  against  the  delinquent  party,  or,  if  the  money 
had  been  paid,  the  law  would  not  enable  the  party  paying  to 
recover  it  back,  but  would  leave  them  as  they  placed  themselves 
in  carrying  out  the  agreement,  viz.,  to  act  upon  it  as  a  mere 
honorary  arrangement  among  themselves  with  which  the  law 
could  have  nothing  to  do.  But  does  such  a  rule  apply  to  a 
principal  and  his  agent  who  has  received  money  for  his  princi- 
pal on  such  an  agreement  ?  The  money  has  been  paid  to  an 
agent  for  his  principal  by  a  party  who  could  not  have  been 
compelled  to  make  such  payment.  But  having  been  paid  vol- 
untarily, it  becomes  the  property  of  the  principal  in  the  agent's 
hands,  for  which  he  should  account ;  he  has  no  right  to  refuse 
payment  to  his  principal  because  his  principal  had  not  a  legal 
claim  for  the  money  on  the  agreement.  So  far  as  there  was  a 
contract  between  the  Transit  Company  and  the  defendant,  the 
contract  was  legal ;  he  was  to  receive  moneys  for  them  and  pay 
over  to  the  company.  An  agent  has  no  right  to  dispute  the 
title  of  his  principal  to  moneys  received  by  him  for  the  princi- 
pal's use.  Nor  has  he  a  right  to  resist  an  action  for  the  amount 
so  received,  on  the  ground  that  the  money  was  paid  on  an  illegal 
contract  between  the  original  parties.  This  was  so  held  in  Ten- 
ant v.  Elliot,  1  B.  and  P.  3,  and  in  Farmer  v.  Russell,  I  Id. 
296-298.  EYRE,  C.  J.,  says :  "  The  plaintiff's  demand  arises 
simply  out  of  the  circumstance  of  money  being  put  into  the  de- 
fendant's hands  to  be  delivered  to  the  plaintiff.  This  creates  an 
indebitatus  from  which  an  assumpsit  in  law  arises  and  on  that  an 
action  on  the  case  may  be  maintained."  And  again  :  "  The 


106  DAVID  C.  MURREY,  ETC.,  v.  VANDERBILT, 

case  is  brought  to  tins,  that  the  money  has  got  into  the  hands 
of  a  person  who  was  not  a  party  to  the  contract,  who  has  no 
pretense  to  retain  it,  and  to  whom  the  law  could  not  give  it  by 
rescinding  the  contract."  BULLER,  J.,  also  says  :  "  When  it 
appeared  that  the  agent  had  received  the  money  to  the  plain- 
tiffs use,  it  was  immaterial  whether  the  money  was  paid  on  a 
legal  or  illegal  contract.''  Citing  Faikncy  v.  Ret/nous,  Burr, 
2069  ;  Attenbrook  v.  Hall,  2  Wilson,  309.  So  where  a  confiden- 
tial relation  of  principal  and  agent  exists  in  regard  to  a  trust  for 
the  benefit  of  the  principal,  the  agent  can  not  object  that  the 
trust  is  void,  Jenkins  v.  Eld-ridge,  3  Story,  182.  I  know  of 
no  rule  which  will  enable  an  agent  for  such  a  cause  to  retain  in 
his  hands  moneys  received  by  him  from  a  third  person  for  his 
principal. 

£fter  the  making  of  the  original  contract  or  agreement  with 
the  Pacific  Mail  Steamship  Company,  payments  were  regularly 
made  till  about  llth  of  June,  1856  ;  and  some  payments  for  trips 
on  the  other  side  were  made  afterward.  About  that  date,  the 
Pacific  Mail  Steamship  Company  refused  to  pay  on  account  of  the 
running  of  an  opposition  line  from  New  York,  by  Morgan  and 
Garrison.  Previous  to  this  date,  the  act  of  the  Rivas- Walker 
government,  in  taking  away  the  charter,  had  gone  into  effect. 
Under  it  the  property  of  the  Transit  Company,  which  was  in 
Central  America,  had  been  taken  possession  of  by  agents  ap- 
pointed by  that  Government.  The  defendant  had  made  exertions, 
both  at  Washington  and  Central  America,  to  obtain  a  restoration 
to  the  company  of  its  rights  and  property.  These  efforts  had 
proved  fruitless.  The  route  had  passed  from  the  Transit  Com- 
pany into  the  control  of  Morgan  and  Garrison,  on  or  before  the 
month  of  April,  1856.  All  the  steamships  of  the  company  not 
seized  by  the  Rivas- Walker  Government,  had  been  pledged  to  the 
defendant  for  advances  and  other  moneys  due  him,  and  the  pos- 
session of  such  ships  was  by  resolution  given  to  him  on  12th 
June,  1856.  The  affairs  of  the  Transit  Company  had  become 
involved ;  their  debts  had  accumulated ;  their  means  were  all 
expended,  and  their  vessels  were  all  pledged  and  mortgaged  for 
large  amounts.  The  hope  of  a  restoration  of  the  charter  and 
privileges  of  the  company  by  the  Government  of  Nicaragua  had 
vanished,  and  the  state  of  the  company  was  such  as  to  render  it 


IN  THE  SUPREME  COURT  OF  NEW  YORK.  107 

almost  impossible  for  them  to  run  a  line  of  steamers  with  the 
means  which  they  possessed ;  and  even  if  such  a  line  could  have 
been  started,  the  vessels  would  have  been  seized  on  their  arrival, 
and  the  passengers  could  not  have  been  transported  across  the 
isthmus  in  opposition  to  the  will  of  the  existing  Government. 
The  Government  of  the  United  States  had  also  recognized  the 
Rivas- Walker  Government  in  May  preceding,  and  thereby  had 
given  validity  in  this  country  to  the  act  repealing  the  charter  of 
the  company.  It  was  under  this  state  of  affairs  that  the  first 
agreement  between  the  defendant  and  the  officers  of  the  Pacific 
Steamship  Company  was  terminated,  by  the  starting  of  the  oppo- 
sition of  Morgan  &  Garrison,  and  the  notice  from  the  president 
of  the  Pacific  Steamship  Company,  that  they  would  make  no 
further  payments,  in  consequence  thereof.  At  that  time,  the 
agent  informed  the  president,  he  could  stop  when  he  pleased, 
and  he,  the  agent,  was  ready  to  take  care  of  himself,  and  that  he 
would  run  a  line  on  his  own  account.  In  consequence  of  this 
threat  on  the  part  of  the  defendant,  a  further  negotiation  took 
place,  by  which  the  Pacific  Steamship  Company  agreed  to  pay 
for  each  trip  when  no  opposition  was  run,  and  the  defendant  un- 
dertook, on  his  part,  to  get  rid  of  the  opposition  of  Morgan  & 
Garrison.  This  involved  large  expenditures  on  the  part  of  the 
defendant,  in  providing  vessels  and  running  opposition  lines 
against  Morgan  &  Garrison  in  the  Gulf.  Such  expenditures 
were  necessarily  made  by  the  defendant,  because  the  Transit 
Company  had  neither  the  means  nor  the  credit  then  to  carry  on 
such  an  enterprise.  Without  any  furthur  detail  of  the  facts 
proved  in  regard  to  this  branch  of  the  case,  there  can  be  but 
little  doubt  that  the  defendant,  at  this  time,  was  acting  on  his 
own  behalf,  and  not  for  the  company.  That  he,  considering  the 
condition  of  the  company  hopeless,  would  have  undertaken  the 
expenditures  of  large  sums  of  money  to  break  down  the  opposi- 
tion of  Morgan  &  Garrison,  without  any  prospect  of  repayment 
to  himself,  is  hardly  to  be  presumed ;  and  my  conclusion  is,  that 
this  second  agreement  for  a  subsidy,  made  about  July,  1856,  was 
made  on  his  own  account,  and  not  for  the  company,  and  was  not 
intended  by  him  or  the  parties  with  whom  it  was  made,  to  be  for 
any  other  purpose  than  the  individual  interest  of  the  defendant. 
The  subsequent  agreements  made  in  June,  1857,  and  in  July, 


108  DAVID   C.  MURREY,  ETC.,  v.  VANDERBILT, 

1858,  were  of  course,  of  the  same  character,  and  intended  for 
the  individual  benefit  of  the  defendant,  and  not  for  the  use  of 
the  company.  The  means,  condition,  and  prospects  of  the  com- 
pany having  at  those  times  become  in  a  much  worse  condition 
than  previously,  and  any  prospect  that  might  have  been  before 
entertained  of  its  restoration  having  utterly  failed,  the  defendant 
had  been  authorized  by  a  resolution  of  the  board,  to  sell  all  the 
steamers  of  the  company,  for  the  purpose  of  paying  their  in- 
debtedness. The  question  then  arises,  whether  the  defendant 
bore  such  a  relation  to  the  Transit  Company  at  this  time,  as 
prevented  him  from  making  this  agreement  for  his  own  benefit, 
and  whether  any  rule  of  law  exists  by  which  he  can  be  com- 
pelled to  account  to  the  company  for  the  moneys  received  by  him 
under  this  agreement.  The  defendant  had  been  the  agent  of  the 
Transit  Company  previous  to  the  1st  of  June,- 1856,  under  a 
resolution  passed  3d  January,  1856.  This  agency,  by  the  reso- 
lution and  by  the  agreement  between  the  defendant  and  the  com- 
pany, terminated  at  that  time,  and  there  is  no  evidence  to  show 
its  renewal.  He  had  become  a  large  creditor  of  the  company  by 
advances,  and  had  liens  on  all  the  vessels  of  the  company  as 
security  for  part  of  such  advances,  and  for  bonds  issued  by  the 
company  which  he  owned.  The  relation  he  bore  to  the  company 
was  that  of  president  and  a  creditor ;  and  the  question  is,  whether 
there  was  existing,  as  between  him  and  the  company,  the  rela- 
tion of  trustee  and  cestui  que  trust,  which  rendered  it  improper 
for  him  to  make  such  an  agreement  for  his  own  use.  I  do  not 
deem  it  necessary  to  discuss  the  question  whether  the  defendant, 
being  president  of  a  company,  having  the  means  and  the  power 
and  authority  to  run  steamers  on  such  a  route,  could  make  a  con- 
tract to  lay  up  such  steamers  and  take  to  himself  a  compensation 
for  so  doing.  I  think  it  must  be  conceded  that  he  could  not,  and 
that  such  a  contract  would  be  for  the  benefit  of  the  company,  and 
not  of  the  president.  But  when  the  company  had  virtually,  ceased 
to  exist ;  when,  at  any  rate,  for  all  purposes  of  business,  and  for 
promoting  the  object  of  the  charter,  as  originally  granted,  all  its 
powers  had  been  taken  away,  its  property  all  expended,  and  the 
company  hopelessly  insolvent,  I  have  not  been  able  to  adopt  the 
conclusion,  that  any  such  rule  can  be  applied,  more  especially  as 
the  agreement  imposed  no  duty  or  restraint  on  the  company. 


IN  THE  SUPREME   COURT  OF  NEW  YORK.  109 

The  vast  number  of  cases  to  which  the  counsel  of  the  plaintiff 
has  referred,  are  cases  where  the  agent  or  trustee  has  taken  to 
his  own  benefit  the  property  of  the  cestui  que  trust,  or  has  done 
some  act  which  the  cestui  que  trust,  through  him,  could  have 
done  for  his  benefit  and  advantage,  or  has  used  the  property  of 
the  cestui  que  trust  for  purposes  resulting  in  benefit  to  himself, 
which  might  have  resulted  in  like  benefit  to  the  person  for  whom 
he  was  acting.  This  is  not  the  present  case.  The  property  of 
the  company  was  not  used ;  the  company  could  not,  in  any  way, 
run  a  line  to  the  isthmus.  The  company,  in  fact,  had  no  exist- 
ence for  such  a  purpose,  and  the  rule  in  regard  to  a  misapplica- 
tion of  the  property  or  rights  of  the  cestui  que  trust  can  not  ap- 
ply to  the  case.  In  addition  to  this,  the  agreement  imposed  no 
duty  or  obligation  on  the  company,  nor  was  it  put  under  any 
restraint  thereby.  The  company  could  have  run  a  line  the  next 
day  if  it  had  the  power  and  means,  as  fully  as  it  could  the  day 
before  the  agreement  was  made.  In  order  to  apply  this  rule 
to  the  present  case,  we  must  extend  it  so  far  as  to  say  that  the 
defendant  was  prevented  by  his  relations  to  the  company  from 
running  any  steamers  to  the  Isthmus  while  that  relation  to  the 
company  existed,  and  that  even  after  the  company  had  lost  the 
ability  to  provide  vessels  and  run  them  on  the  account  of  the 
company. 

I  do  not  understand  the  relation  of  principal  and  agent,  or 
of  trustee  and  cestui  que  trust,  involving  any  such  obligation. 
The  law  protects  the  party  against  the  agent  or  trustee  in  the 
use  of  its  property  and  rights,  but  not  beyond  them,  and  does 
not  prevent  the  performance  of  acts  which  could  not  result  in 
damage  to  the  principal,  or  which  could  not  conflict  with  the 
interests  of  the  company.  The  being  president  of  an  insolvent 
corporation  can  not  prevent  him  from  doing  what  that  company 
had  lost  all  ability  to  do,  even  if  its  existence  continued.  Where 
the  company  has  virtually  ceased  to  exist,  and  its  powers  have 
been  taken  away,  I  think  the  reason  and  policy  of  the  rule 
ceases  also — because  no  duty  rested  upon  the  agent  to  run  the 
line  for  the  company,  after  the  authority  and  ability  of  the  com- 
pany to  do  so  had  terminated.  The  case  of  Abbott  v.  American 
Hard  Rubber  Company,  33  Barbour,  578,  and  the  Cumberland 
Coal  Company  v.  Sherman,  30  Id.  553,  were  cases  involving  the 


110  DAVID  C.  MURREY,  ETC.,  v.  VANDERBILT, 

sale  of  the  property  of  the  corporation ;  but  even  that  rule  is 
modified  in  the  case  of  an  officer  who  is  also  a  creditor,  and  acts 
for  his  own  protection,  Smith  v.  Lansing,  22  New  York,  52G  (a). 
It  may  well  be  doubted  whether  the  terms  of  this  agreement 
were  at  all  within  the  bounds  of  the  agency.  The  object  of  the 
charter  of  the  company  was  to  run  vessels  to  the  Isthmus  and 
back,  not  to  make  money  by  agreeing  not  to  run.  The  duties 
of  the  president  were  only  in  furtherance  of  the  objects  of  the 
charter.  An  agreement  on  his  part  not  to  run  a  line  himself, 
would  have  been  to  the  benefit,  not  the  injury,  of  the  company, 
if  they  had  the  means  and  power  to  continue  their  own  line. 
The  agreement  on  his  part  not  to  run  was  no  violation  of  those 
duties,  and  no  interference  with,  or  violation  of,  the  rights  of  the 
company.  They  were  not  affected  by  it.  They  had  no  restraint 
upon  them  by  which  they  were  prevented  from  running  the  line, 
if  they  were  able  to  do  so.  If  it  had  been  shown  that  in  con- 
sequence of  this  agreement  the  defendant  prevented  the  steamers 
of  the  company  from  running,  another  claim  might  have,  per- 

(a)  In  Smith,  receiver,  etc.,  v.  Lansing,  22  New  York,  520,  it  was  held  that  the 
financial  officer  of  a  bank  is  not  disqualified  from  purchasing  for  his  own  benefit 
property  pledged  to  it  for  a  debt.  He  discharges  his  duty  when  he  sees  to  it 
that  the  sale  is  for  a  price  sufficient  to  discharge  the  lien,  and  does  not  stand  as 
a  trustee  for  any  profit  he  may  obtain  by  buying  at  that  price.  That  the  gen- 
eral manager  of  a  bank  may  make  arrangements  to  secure  himself  and  others, 
who,  at  his  request,  have  become  its  sureties  for  moneys  deposited.  And  such 
security  not  having  been  given  when  the  liability  was  assumed,  the  general 
manager  may  use  the  funds  and  property  of  the  bank  to  indemnify  the  sureties 
at  any  time  when  the  bank  is  solvent,  and  not  contemplating  insolvency.  Ac- 
cordingly, where  such  a  manager  purchased  in  his  own  name  real  estate  mort- 
gaged to  the  bank,  using  its  funds  to  pay  his  bid,  and  intending  to  hold  the 
property  for  the  security  of  himself  and  his  co-sureties,  and  the  bank  afterward 
became  insolvent,  held,  that  the  receiver  could  not  compel  a  conveyance  without 
indemnifying  the  sureties. 

Tliis  ruling,  however,  appears  to  have  been  made  with  a  qualification,  for 
two  of  the  judges  protested  "against  any  implication  that  the  financial  officer 
of  a  moneyed  corporation  is  at  liberty  to  speculate  upon  real  estate  bought  by 
him  under  execution  or  the  foreclosure  of  a  mortgage  in  its  favor."  The  reason- 
ing of  the  court  appears  to  sustain  the  text  of  the  case,  in  allowing  an  officer 
of  a  corporation  to  take  advantage  of  his  position  and  knowledge  to  protect  or 
speculate  for  himself,  to  the  injury  of  the  general  creditor. 

The  late  case  of  Drury  v.  Orott,  a  decision  by  the  Supreme  Court  of  the 
United  States,  7  Wallace,  302  (and  which  is  reproduced  hereinafter),  is  in  direct 
contravention  to  the  latitude  that  seems  to  have  been  allowed  in  the  Vanderbilt 
case,  as  well  as  in  that  of  Smith  v.  Lansing. 


IN  THE   SUPREME  COURT  OF  NEW  YORK.  Ill 

haps,  arisen  out  of  that  misfeasance.  But  there  is  no  ground 
for  that  charge.  On  the  contrary,  as  has  before  been  remarked, 
the  company  were  utterly  without  means  to  run  the  line,  and  so 
unable  to  pay  the  claims  against  them,  that  they  had  on  June 
2,  1856,  obtained  the  consent  of  the  defendant  to  purchase  some 
of  the  vessels  advertised  to  be  sold  to  pay  Morgan  &  Hoyt,  and 
on  the  12th  of  June  had  placed  the  possession  of  all  their 
steamers  with  the  defendant  as  security,  and  on  the  2d  of  August 
had  mortgaged  to  him  all  their  coal,  coal-hulks,  etc.,  on  the  Pa- 
cific, as  security  for  advances,  and  gave  him  possession  thereof; 
and  in  November,  1856,  they  authorized  the  defendant  to  sell 
all  of  the  steamers  of  the  company,  and  apply  the  proceeds  to 
the  payment  of  their  debts.  I  think  there  can  be  no  doubt  that, 
after  the  12th  of  June,  the  company  was  unable  to  carry  on  its 
business ;  that  its  powers  had  ceased,  and  that  the  agreement 
afterward  made  by  Vanderbilt  with  the  Pacific  Steamship  Com- 
pany in  no  way  infringed  the  rights  or  interfered  with  the  in- 
terests of  the  Transit  Company,  and  in  no  way  violated  the  duty 
he  owed  to  that  company  as  the  president  thereof.  I  conclude, 
therefore,  that  he  is  not  liable  to  account  to  the  receiver  for  any 
moneys  received  by  him  from  the  Pacific  Mail  Steamship  Com- 
pany on  account  of  the  subsidy  under  the  agreements  made  by 
him  after  the  12th  of  June,  1856  (a). 


(a)  This  case  can  not  be  received  as  an  unquestioned  authority.  The  facts 
therein  clearly  show,  that  Vanderbilt,  by  virtue  of  his  office  as  president  of  the 
Transit  Company,  became  fully  informed  of  the  affairs  of  his  company;  and  em- 
barrassed though  it  was,  it  was  still  his  duty  to  give  it  the  benefit  of  all  his  abil- 
ity and  experience.  As  the  difficulties  of  the  company  increased,  the  moi'e  binding 
became  his  duty  to  give  to  it  all  his  abilities  and  experience  in  the  management 
of  its  business.  True,  he  was  not  bound  by  such  duty 'to  become  surety  or  ad- 
vance to  his  company  moneys;  but  having  done  so,  he  put  himself  in  the  position 
of  other  creditors,  and  his  being  an  officer  of  the  company  did  not  justify  him, 
as  such,  in  appropriating  to  himself  advantages  not  open  to  or  shared  in  by  other 
creditors  of  the  company,  Drury  v.  Cross,  1  Wallace,  302.  Notwithstanding  this, 
it  is  found  he  makes  a  sham  sale  of  the  company's  property  to  his  son,  thereby 
getting  the  control  of  its  means  to  bring  the  rival  company  to  terms,  and  enable 
himself  to  profit  by  a  contract,  which,  at  best,  was  but  a  renewal  of  one  that  he 
had  formerly  made  for  his  own  company.  Herein  it  is  parallel  with  the  case  of 
the  Aberdeen  Railway  Company  v.  Blaikie,  preceding,  wherein  it  was  sought  to  give 
a  contract  entered  into  under  circumstances  similar  to  this,  effect  as  a  new  and 
independent  contract;  but  the  court  held  it  to  be  a  mere  renewal  of  the  old  one. 
Again,  the  case  assimilates  to  that  of  a  ward  arriving  at  full  age,  and  dealing 


112  DAVID  C.  MURREY,  ETC.,  v.  VANDERBILT, 

The  plaintiff  also  claims  an  accounting  for  the  steamships 
sold  by  the  defendant  for  the  account  of  the  company.  These 
vessels  were  all  mortgaged  to  the  defendant  for  advances  made 
by  him  to  the  company,  and  foi>  bonds  held  by  him  against  the 
company,  the  validity  of  which  is  not  denied.  His  authority  to 
sell,  therefore,  can  not  be  disputed.  All  the  vessels  sold,  except- 
ing the  Brother  Jonathan,  were  accounted  for  to  the  company 
long  before  the  appointment  of  the  receiver.  These  accounts 
appear  to  have  been  acquiesced  in  by  the  company.  In  the 
accounts  thus  rendered  nothing  is  said  of  the  Brother  Jonathan. 
Lea,  in  his  testimony,  says  that  no  account  was  ever  furnished, 
and  no  evidence  is  given  to  the  contrary.  For  the  proceeds  of 
this  vessel  the  defendant  is  bound  to  account. 

There  is  nothing  in  the  evidence  which  would  warrant 
the  opening  of  the  other  accounts  for  the  sale  of  the  steam- 
ers, except  that  relating  to  the  sale  to  William  H.  Vanderbilt. 


with  his  guardian.  The  latter  is  not  bound  by  a  contract  entered  into  with  the 
former,  which  gives  the  guardian  profits  or  advantages  at  the  expense  of  the 
ward,  unless  afterward  affirmed  under  circumstances  showing  the  removal  of  all 
restraint  and  influence,  and  made  with  full  knowledge,  Wright  v.  Arnold,  14  B. 
Monroe,  G46;  Clay  v.  Clay,  3  Metcalf,  552;  and  numerous  similar  authorities. 
The  receiver  bringing  suit,  is  a  disaffirmance  o£  Vanderbilt's  contracting  for 
himself. 

Although  insolvent,  as  is  stated  by  the  court,  the  company  still  had  a  legal 
existence,  and  at  the  time  of  the  renewal  of  the  contract  Vanderbilt  was  the 
president,  and  consequently  the  trustee  for  the  Transit  Company.  Within  the 
technical  rule,  why  does  not  the  maxim  apply,  that  although  fraud  could  not  be 
proved,  under  the  circumstances  it  would  be  implied?  From  his  condition  ns 
agent  and  manager  of  the  company,  he  could  easily  cover  up  any  evidence  of 
fraud.  The  entire  facts  of  Vanderbilt's  dealing  with  the  Transit  Company  should 
be  considered  together,  to  give  character  to  the  true  equitable  import  of  the  re- 
newed contract  of  June  12,  1856,  nnd  not  thai,  part  isolated  from  the  rest. 

All  taken  together,  it  is  apparent  that  this  decision  is  one  of  the  many  that 
have  recently  brought  at  least  a  part  of  the  judiciary  of  New  York  into  disrepute. 
This  loosening  of  the  strict  rules  governing  the  fiduciary  relation  lias  just  driven 
one  jndjrc  from  the  bench;  and  if  the  association  of  attorneys  in  New  York  city 
is  to  be  credited,  others  should,  and  may  be,  compelled  to  follow  the  example.  As 
yet,  no  similar  complaint,  outside  of  New  York,  has  been  sufficiently  authenticated 
to  lead  to  similar  results.  At  a  time  when  the  legislative  bodies  of  the  country 
nre  violating  their  duties  as  trustees  for  the  community  at  large,  THE  JUDICIARY 
is  THE  ONLY  SAFEGUARD!  It  should  be  above  even  suspicion.  And  in  regard  to 
Judge  IXGRAHAJI'S  decision  in  this  case,  it  is  intended  to  say  only,  that  the  strict 
rule  governing  the  relations  of  trustees  has  been  unwisely,  injudiciously,  and 
inequitably  relaxed. 


IN  THE  SUPREME  COURT  OF  NEW  YORK.  113 

The  other  vessels  appear  to  have  been  fairly  sold,  at  a  price  not 
below  their  value  in  the  condition  and  under  the  circumstance 
in  which  they  were  sold;  and  the  proceeds  of  the  sale  have 
been  acccounted  for  to  the  company,  and  such  account  acqui- 
esced in. 

As  to  the  sale  of  the  steamers  Pacific,  Cortes,  and  Uncle  Sam, 
to  William  H.  Vanderbilt,  I  do  not  think  it  was  such  a  sale  as 
can,  under  the  circumstances  and  relations  of  the  parties,  be 
sustained.  The  purchaser  was  his  son,  totally  unacquainted 
with  their  value,  having  no  occasion  for  the  purchase.  He  paid 
no  money  therefor,  but  gave  his  note  to  the  defendant,  payable 
in  a  year.  The  defendant  paid  all  expenses,  and  kept  the  con- 
trol and  management  of  the  vessels.  William  does  not  appear  to 
have  been  interested  in  the  accounts  or  management  of  the  ves- 
sels, but  left  all  in  the  charge  of  the  defendant.  The  defend- 
ant ran  the  vessels  in  an  opposition  line  on  the  Pacific.  He  does 
not  appear  to  have  accounted  or  allowed  for  the  use  of  them. 
He  says  he  has  not  paid  William  any  thing  on  account  of  them 
since  the  sale.  No  account  has  ever  been  rendered  of  these 
vessels  by  the  defendant  to  William,  nor  has  it  ever  been  shown 
that  any  account  between  William  and  the  defendant  exists  in 
regard  to  them.  The  negotiations  for  the  supposed  sale,  also, 
were  such  as  to  throw  great  doubt  on  the  bona  fides  of  the  trans- 
action. Under  all  the  facts  in  evidence,  I  can  not  avoid  the 
conclusion,  that  this  purchase  was  rather  an  arrangement  to  get 
the  title  out  of  the  company  into  the  defendant.  Such  a  trans- 
action can  not  be  upheld.  If  the  defendant  had  put  up  the  prop- 
erty for  sale,  and  had  purchased  the  same  in  his  own  name,  it 
might  have  been  held  to  be  good,  because  he  had  a  lien  upon  it 
which  he  had  a  right  to  protect  by  purchase ;  but,  in  such  a 
case,  the  sale  should  have  been  an  open  one,  with  an  opportu- 
nity to  others  to  compete  with  him  for  the  purchase.  Irrespect- 
ive of  his  having  a  lien  on  the  vessels  by  way  of  mortgage,  he 
could  not  even  have  been  a  purchaser  at  such  a  sale,  because 
the  purchase  would  have  been  incompatible  with  his  position  as 
agent  to  sell.  This  sale  must  be  set  aside,  and  the  agent  must 
account  for  the  proceeds  of  these  vessels,  as  sold  by  him  after- 
ward, lie  will  be  entitled  to  credit  for  all  the  moneys  due  him 
thereon  under  the  mortgages,  and  also  for  all  money  expended 

8 


*-H4  DAVID  C.  MURREY,  ETC.,  v.  VANDERBILT. 

for  repairs  prior  to  the  sale  by  him.  The  appraisement  of  the 
Daniel  Webster,  and  the  appropriation  by  the  defendant  of  that 
vessel  to  his  own  use,  at  the  appraised  value,  can  hardly  be  con- 
sidered within  the  powers  conferred  upon  him  by  the  resolution 
authorizing  the  sale.  Had  such  appraisement  been  submitted  to 
the  company,  and  their  assent  by  resolution  obtained,  the  case 
would  be  a  different  one.  But  the  company  was  no  party  to 
the  transaction.  They  had  nothing  to  do  with  the  selection  of 
appraisers,  nor  were  they  consulted  by  the  defendant  as  to  the 
appropriation  and  use  of  the  steamer  by  himself.  The  bill  of 
sale,  purporting  to  have  been  executed  by  the  Transit  Company 
to  the  defendant,  for  the  Daniel  Webster,  dated  the  18th  Novem- 
ber, 1856,  is  not  entitled  to  consideration  in  connection  with  this 
branch  of  the  case,  because  there  was  no  warrant  for  any  such 
bill  of  sale  in  the  proceedings  of  the  company^  and  no  resolu- 
tion appears  on  the  minutes  of  the  company,  at  any  time  author- 
izing such  a  sale  to  the  defendant.  The  same  remark  may  be 
made  as  to  various  other  papers  executed  by  Lea,  as  secretary, 
for  which  no  authority  can  be  found  in  the  minutes  of  the  com- 
pany, and  which  Lea,  as  secretary,  had  no  authority,  without 
such  action  of  the  board,  to  execute.  Among  them  are  the  con- 
tract with  William  H.  Vanderbilt,  bills  of  sale  to  him  of  the 
steamers  and  of  coal,  and  bill  of  sale  of  William  H.  Vanderbilt's 
note  to  the  defendant.  All  these  papers  appear  to  have  been 
executed  without  any  other  authority  from  the  company  than 
that  of  the  resolution  of  the  13th  November,  1856,  and  can  not 
be  relied  on  as  ratifying  any  contract  between  the  defendant 
and  William  as  to  the  contracts  therein  stated. 

The  sale  of  the  coal,  hulks,  etc.,  on  the  Pacific,  to  William 
H.  Vanderbilt,  is  subject  to  the  same  objections,  and  the  same 
rule  must  be  applied  as  that  in  regard  to  the  steamers,  and  the 
same  accounting  therefor  is  ordered. 


GARDNER  v.  OGDEN.  US'*  j 


GARDNER  v.  OGDEN,  et  al. 

\This  case  was  decided  at  the  December  Term,  1860,  of  the  Court  of  Ap- 
peals of  the  State  of  New  York;  Judge  HENRY  E.  DAVIES  delivering  the 
opinion  of  the  Court.  Reported  in  22  New  York,  327.] 

The  Supreme  Court  has  jurisdiction  to  compel  the  conveyance,  by  a  defendant 
who  has  appeared  in  the  suit,  of  land  in  a  foreign  state. 

The  clerk  of  a  broker  employed  to  make  sale  of  land,  who  has  access  td  the  cor- 
respondence between  his  principal  and  the  vendor,  stands  in  such  a  relation 
of  confidence  to  the  latter,  that  if  he  becomes  the  purchaser,  he  is  chargeable 
as  trustee  for  the  vendor,  and  must  reconvey  or  account  for  the  value  of  the 
land. 

The  vendor  can  not,  it  seems,  unite  in  the  same  action  a  claim  against  the  broker 
for  damages  for  having  fraudulently  sold  the  land,  with  a  claim  against  the 
purchaser  for  a  reconveyance  or  accounting. 

The  clerk,  in  this  case,  held  to  reconvey  so  much  of  the  land  as  remained  in  his 
hands,  and  to  account  for  the  proceeds  of  what  he  had  sold,  although  the 
price  paid  by  him  upon  the  purchase  was  fair  and  adequate,  and  the  broker 
was  exonerated  from  fraud  in  the  sale. 

APPEAL  from  the  Supreme  Court.  Action  to  avoid  a  deed 
as  fraudulently  obtained  from  the  plaintiff,  and  to  compel  the 
defendant  Smith  to  reconvey  to  the  plaintiff  the  real  estate 
therein  described,  or,  as  an  alternative,  that  Smith  and  his 
co-defendant,  Ogden,  should  pay  the  value  of  the  land.  Upon 
the  trial  before  Mr.  Justice  GOULD,  the  following  facts  were 
proved : 

In  and  prior  to  the  year  1853,  the  plaintiff,  a  resident  of 
Troy,  in  this  state,  was  the  owner  of  sixteen  lots  of  land  in  the 
city  of  Chicago,  in  the  state  of  Illinois.  He  had,  as  early  as 
the  year  1851,  employed  the  firm  of  Ogden,  Jones  &  Co.,  resid- 
ing and  doing  business  in  the  latter  city,  as  his  agents,  to  make 
sale  of  the  lots,  whenever  practicable,  and  in  the  meanwhile,  to 
look  after  them  and  pay  the  taxes  thereon.  The  firm  was  com- 
posed of  the  defendant  William  B.  Ogden,  and  Mahon  D.  Ogden 
and  Edwin  H.  Sheldon.  During  the  years  1852,  1853,  and  up 
to  July  12,  1854,  the  defendant  Smith  and  one  Franklin  Hatha- 
way were  clerks  of  said  firm.  On  the  9th  of  March,  1852,  the 
firm  of  Ogden,  Jones  &  Co.,  addressed  to  the  plaintiff  a  letter, 
in  which  they  state,  that  Mr.  Ogden  had  valued  the  plaintiff's 
lots  at  $5,560,  and  that  it  was  the  highest  valuation  which  the 


116  GARDNER  v.  OGDEN, 

lots  would  bear.  It  was  also  stated  in  this  letter,  that  by  forc- 
ing the  lots  on  the  market,  a  discount  of  from  twenty-five  to 
thirty  per  cent  would  have  to  be  submitted  to  on  this  valua- 
tion. It  was  added:  "We  are  of  opinion,  that  the  coming  sea- 
son will  be  a  favorable  one  for  bringing  a  portion  of  this  property 
into  market,  and  making  sales  at  good  prices."  Ogden,  Jones 
&  Co.,  under  the  date  of  April  8,  1852,  addressed  a  letter  to  the 
plaintiff,  which  was  written  by  Hathaway  and  signed  by  him  for 
the  firm,  in  which  they  said  :  "  As  soon  as  the  block  can  be  re- 
surveyed  and  subdivided,  we  shall  be  ready  to  sell.  If  applica- 
tions are  made  for  any  of  your  lots,  we  will  at  once  apprise  you 
as  you  desire."  On  the  24th  of  June,  1853,  the  plaintiff  again 
wrote  to  Ogden,  Jones  &  Co.,  in  which  letter  he  said,  that  from 
what  he  heard  of  sales  of  other  lots,  his  were  worth  $1,000  a 
lot,  or,  in  the  aggregate,  $16,000.  He  wished -his  sold  as  near 
that  sum  as  possible,  one-third  cash  and  the  balance  on  interest 
at  two,  three,  or  five  years.  If  the  offer  did  not  come  up  to 
$700,  he  wished  to  be  advised  before  concluding  the  sale.  He 
desired  his  lots  sold  as  soon  as  possible,  as  he  wished  to  close  up 
his  distant  matters ;  that  he  had  fixed  the  minimum  at  $500  a 
lot,  but  had  learned  it  was  too  low  a  figure.  He  added :  tl  I 
wish  your  opinion  as  to  price  and  terms  on  which  you  can  sell 
my  lots,  and  whether  you  advise  the  sale  at  such  prices."  Un- 
der date  of  June  30,  1853,  Ogden,  Jones  &  Co.  acknowledged 
the  receipt  of  the  plaintiff's  letter  of  June  24th,  and  said  he  was 
not  likely  to  get  $700  each  for  his  lots ;  that  they  thought  $500 
each  a  fair  price  on  retailing  them ;  that  possibly  $600  might  be 
got  for  some  of  them,  and  possibly  $700  might  be  obtained  for 
some ;  that  they  would  make  every  effort  to  sell  for  $700,  and 
would  advise  of  progress.  Under  date  of  July  4th,  the  plaintiff 
wrote  them  that  he  thought  he  had  better  hold  on  to  his  lots, 
than  sell  them  at  retail  for  $500;  that  if  within  the  year  1853 
they  would  bring  $9,000  or  more,  he  would  sell  on  the  terms  he 
had  before  proposed.  After  January  1,  1854,  he  would  consider 
of  new  terms  of  sale,  as  he  thought  the  property  must  advance. 
On  the  6th  of  October,  1853,  the  plaintiff  wrote  Ogden,  Jones 
&  Co.,  that  he  could  sell  his  lots  for  a  fine  $8,000  house  in 
Troy ;  that  if  they  could  sell  them  for  $500  each,  or  within 
S500  of  it,  on  notes  payable  in  Troy,  Albany,  or  New  York,  at 


IN  THE  COURT  OF  APPEALS  OF  NEW  YORK.  117 

three,  six,  nine,  and  twelve  months,  he  authorized  them  to  do 
so,  on  those  terms.  He  added :  "  As  I  may  not  exchange, 
and  prefer  to  sell  outright,  please  to  see  what  you  can  do  by 
October  25th."  On  the  26th  of  October,  1853,  the  receipt  of 
this  letter  was  acknowledged  by  Ogden,  Jones  &  Co.,  in  a  letter 
to  the  plaintiff.  It  was  written  by  Hathaway,  their  clerk,  in  their 
name.  In  it  they  said :  "  We  have  now  to  report  an  offer 
made  by  Mr.  Henry  Smith  for  your  lots,  as  follows :  He  pro- 
poses to  give  you  $7,500,  payable  at  the  end  of  five  or  six 
years.  If  this  offer  is  accepted,  we  will  at  once  prepare  the 
necessary  papers,  and  see  that  security  is  ample."  They  added : 
"  We  doubt  whether  a  better  offer  than  this  can  now  be  obtained, 
as  it  is  larger  than' the  price  paid  for  Mr.  Hearlt's  block  three 
in  same  addition.  An  early  answer  is  desired.''  The  plaintiff 
answered  this  letter,  as  it  is  to  be  inferred,  during  the  same 
month  of  October,  as  his  letter  commenced,  "Yours  of  the  26th 
inst.  is  received.''  In  it  he  said :  "  The  sale  will  do.  I  sell 
as  I  am  far  off,  and  give  the  buyer  a  good  bargain."  On  the 
1st  of  December,  1853,  the  plaintiff  again  wrote  to  Ogden, 
Jones  &  Co.,  inclosing  a  deed  for  the  premises,  and  requesting 
the  securities  to  be  forwarded  to  him.  He  again  wrote  to  them 
on  the  llth  of  January,  1854,  not  hearing  from  them  in  reply 
to  his  letter  of  December  1st,  and  requested  their  immediate 
attention  to  the  matter.  On  the  13th  of  January,  1854,  Hatha- 
way, as  cashier  of  Ogden,  Jones  &  Co.,  acknowledged  the  re- 
ceipt of  these  letters,  and  stated  that  a  contract  of  sale,  pursuant 
to  the  plaintiffs  letter  of  November  12th,  had  been  executed  by 
Mr.  Sheldon  on  his  part,  and  by  Smith,  the  purchaser,  and  that, 
owing  to  Smith's  absence,  they  had  been  unable  to  get  the  mort- 
gage executed ;  that  it  would  be  done  as  soon  as  Smith  returned, 
and  the  papers  would  be  sent  to  the  plaintiff.  On  the  13th 
of  February,  1854,  Hathaway  again  wrote  to  the  plaintiff  that 
Smith  was  still  absent  in  New  York,  and  that  when  he  returned 
the  mortgage  would  be  executed.  On  the  10th  of  April,  1854, 
the  plaintiff  again  wrote  to  Ogden,  Jones  &  Co.,  requesting  the 
bond  and  mortgage  to  be  sent,  and  on  the  26th  of  May  he  again 
wrote  to  them,  stating  that  he  was  in  receipt  of  their  letter  of 
May  22,  1854,  inclosing  a  note  for  $7,500,  and  the  mortgage. 
In  this  letter  he  said,  that  a  reference  to  the  deed  he  had  sent 


118  GARDNER 'v.  OGDEN, 

settled  the  question  that  the  purchaser  of  the  lots  made  certain 
taxes  thereon  the  debt  of  Mr.  Smith  and  Mr.  Hathaway,  "  who 
now,  by  the  note  and  mortgage,  received  by  me  yesterday, 
appear  to  be  joint  purchasers  of  my  lots  in  Mr.  Smith's  name." 
On  the  12th  of  June,  1854,  the  plaintiff  advised  Ogden,  Jones 
&  Co.  of  his  dissatisfaction  with  the  sale  to  Smith  and  Hathaway, 
and  ad  vised  them,  also,  of  his  dissent  thereto.  The  precise  tinu 
when  the  mortgage  by  Smith  and  wife,  and  the  note  of  Smith  and 
Hathaway  to  the  plaintiff  were  given,  did  not  appear.  As  they 
were  promised  frequently  to  be  sent  to  the  plaintiff  as  soon  as 
executed,  and  were  sent  to  him  in  a  letter,  under  date  of  May 
22,  1854,  it  is  inferable  they  were  executed  about  that  date.  On 
the  24th  and  25th  of  March,  1854,  Smith,  by  M.  D.  Ogden  a» 
his  attorney,  sold  portions  of  the  lots  purchased  of  the  plaintiff 
for  the  sum  of  $8,250  ;  and  on  the  3rd  of  May,  1854,  Hathaway, 
as  Smith's  agent,  sold  another  portion  thereof  for  the  sum  of 
$1,000.  The  portions  so  sold  were  nine  lots  of  the  sixteen  orig- 
inally held  by  the  plaintiff.  This  action  was  commenced  against 
the  defendants,  Ogden  &  Smith,  and  in  the  complaint,  the  plain- 
tiff prayed  that  said  Smith  might  set  forth  whether  he  had  sold 
said  plaintiffs  lots,  when  and  to  whom,  and  for  what  price,  and  that 
plaintiff  might  have  judgment  setting  aside  said  deed  to  Henry 
Smith,  and  declaring  said  sale  to  said  Smith  to  be  void,  and  that 
he  reconvey  said  sixteen  lots  to  the  plaintiff,  unincumbered  and 
with  the  same  title  that  the  plaintiff  conveyed  to  him,  or  that 
said  Smith  and  Ogden  should  pay  to  the  plaintiff  the  highest 
value  of  the  said  sixteen  lots,  at  the  time  of  the  commencement 

'  \ 

of  this  action,  or  at  any  time  subseqent,  and  that  they  pay  the 
costs  of  the  action.  On  their  compliance  with  such  judgment, 
the  plaintiff  offered  to  surrender  the  mortgage  and  note  received 
by  him.  The  defendants  answered,  denying  all  fraud ;  and  the 
defendant  Smith,  in  his  answer,  admitted  that  he  and  Hathaway 
were  clerks  of  Ogden,  Jones  &  Co.  during  the  year  1852,  and 
up  to  July  12,  1854.  Smith  also  set  up  in  his  answer,  that  after 
the  sale  and  conveyance  by  the  plaintiff  to  him,  he  had  sold  and 
conveyed,  by  contract  for  deeds,  a  part  of  said  lots  to  divers  per- 
sons in  good  faith,  and  that  the  legal  possession  and  occupancy 
of  a  portion  of  said  lots  were,  at  the  time  of  his  answering,  in 
persons  other  than  himself,  and  that  a  portion  of  said  lots  had 


IN  THE  COURT  OF  APPEALS  OF  NEW  YORK.  119 

been  built  upon  and  otherwise  permanently  improved  by  the 
purchasers  thereof. 

The  judge  at  special  term  found  the  value  of  the  lots,  at  the 
time  of  the  trial  (April  18,  1856,)  to  be  $15,000,  and  made  a 
decree  that  the  defendants,  Ogden  &  Smith,  should  pay  to  the 
plaintiff  that  sum,  with  interest  from  that  date,  or,  instead  of  pay- 
ing that  sum,  Smith,  if  he  should  elect  so  to  do,  might  reconvey 
to  the  plaintiff  such  portions  of  the  said  lots  as  he  had  not  sold 
and  conveyed,  by  a  good  title,  free  of  incumbrance,  and  transfer 
and  assign  to  said  plaintiff,  all  the  contracts  made  and  entered 
into  by  him  for  the  sale  of  any  part  of  said  lots,  and  pay  over  all 
sums  of  money  which  he,  Smith,  had  received  on  such  sales,  with 
interest  thereon  from  the  time  of  such  receipt ;  such  conveyance 
and  payment  to  be  a  satisfaction  of  said  decree,  so  far  as  said 
damages  and  interest  were  concerned.  And  said  defendants  were 
also  decreed  to  pay  the  plaintiff's  costs.  It  was  furthur  provided 
in  the  judgment,  that  in  case  of  such  reconveyance,  assignment, 
and  payment,  the  plaintiff  should  accept  the  same  in  full  of  said 
$15,000  and  interest ;  and  on  payment  thereof  and  compliance 
by  the  defendants  with  the  decree,  the  plaintiff  was  directed  to 
cancel  the  mortgage  of  the  defendant  Smith  and  wife,  and  deliver 
up  to  him  his  and  Hathaway's  note. 

From  this  decree  the  defendants  appealed.  The  court  at 
general  term,  in  the  third  district,  reversed  the  judgment  upon 
questions  of  fact,  and  ordered  a  new  trial.  The  plaintiff  appealed 
from  that  order  to  this  Court,  and  stipulated,  if  the  order  should 
be  affirmed,  that  judgment  absolute  might  be  entered  against 
him. 

William  Curtis  Noyes,  for  the  appellant.  John  H.  Reynolds, 
for  the  respondents. 

[That  part  of  the  very  able  opinion  of  Judge  DAVIES  per- 
taining to  the  question  of  jurisdiction  is  omitted,  as  not  directly 
connected  with  the  subject  of  Trusts.  His  conclusions  thereon 
are :] 

DAVIES,  J.  These  cases  must  be  held  to  establish  the  juris- 
diction of  the  Supreme  Court,  in  the  present  case,  on  an  impreg- 
nable basis,  and  that  the  court,  having  jurisdiction  of  the  party 


120  GARDNER  v.  OGDEN, 

in  whom  the  legal  title  to  the  land  in  controversy  is  vested,  may, 
by  its  process  of  attachment  and  injunction,  compel  him  to  do 
justice  by  the  execution  of  such  conveyances  and  assurances 
as  will  affect  the  title  to  them  in  the  state  of  Illinois. 

It  is  appropriate  here  to  examine  into  the  nature  and  char- 
acter of  the  complaint  in  this  action,  and  the  grounds  upon 
which  it  is  sought  to  make  the  respective  defendants  liable. 
The  defendant  Ogden  is  charged  with  a  fraTid  in  having  made 
sale,  by  himself  or  his  partners,  of  the  plaintiff's  lands,  at  a 
price  far  below  their  actual  value,  and  when  they  knew  that 
they  were  selling  in  an  advancing  market;  that  the  firm,  in- 
cluding Ogden,  was  interested  in  the  purchase  by  Smith  and 
Hathaway,  their  clerks,  and  that  the  sale  was  made  to  them  to 
defraud  the  plaintiff;  and  the  plaintiff  claims  to  recover  of  Og- 
den the  highest  price  which  the  land  has  attained,  by  reason  of 
his  fraudulent  disposition  of  it.  The  plaintiff's  ground  of  claim 
against  Smith  is,  that  he  stood  in  such  relation  of  confidence  to 
the  plaintiff  that,  in  making  the  purchase,  the  law  adjudges  that 
he  holds  the  subject-matter  of  it  as  the  plaintiffs  trustee,  and 
that  the  plaintiff  can  call  him  to  account  as  such.  This  the 
plaintiff  can  do,  if  such  relation  of  confidence  subsists,  by  re- 
quiring a  reconveyance  of  the  property,  if  that  be  practicable, 
with  an  account  and  payment  of  the  rents  and  profits  accruing 
during  the  time  it  was  held  by  the  trustee,  or,  if  that  is  not 
practicable,  by  calling  on  the  trustee  to  account  and  pay  over  to 
his  cestui  que  trust  all  that  he  has  realized,  or  ought  by  due  dil- 
igence to  have  realized,  from  the  trust  estate..  In  the  present 
case,  the  plaintiff  has  elected  to  regard  Smith  as  his  trustee ; 
and  his  complaint  as  to  him,  and  the  decree  of  the  special  term, 
proceeds  on  this  basis.  The  plaintiff,  therefore,  elects  to  affirm 
the  sale  made  to  Smith.  He  can  not,  uno  flatn,  affirm  it  as  to 
him,  and  disaffirm  it  as  to  the  defendant  Ogden.  It  is  difficult 
to  see  how,  under  the  provisions  of  section  167  of  the  Code, 
these  causes  of  action  may  be  united  in  the  same  complaint. 
Although  it  may  be  said  that  both  causes  of  action  arise  out  of 
the  same  transaction — to  wit,  the  sale  of  the  plaintiff's  lands  to 
the  defendant  Smith — yet  the  cause  of  action  against  Ogden  is 
for  an  injury  to  the  plaintiffs  property,  while  that  against  Smith 
is  a  claim  against  him  as  a  trustee  by  operation  of  law.  The 


IN  THE  COURT  OF  APPEALS  OF  NEW  YORK.  121 

causes  of  action  joined  in  this  complaint  do  not  affect  both  of 
the  parties  defendant.  Ogden  is  not  affected  by,  or  in  any  way 
responsible  for,  Smith's  acts  as  the  plaintiff's  trustee,  and  the 
complaint  does  not  profess  to  make  him  liable  therefor.  So, 
Smith  is  not  sought  to  be  made  responsible  for  the  fraudulent 
acts  of  Ogden.  On  the  plaintiff's  own  showing,  he  has  separate 
and  distinct  causes  of  action  against  each  of  the  defendants,  and 
which  can  not  be  joined  under  the  Code.  The  issues  are  sep- 
arate; the  relief  prayed  against  each  is  distinct  and  different; 
and  the  proofs  relied  on  to  maintain  each  issue  are  of  an  entirely 
dissimilar  character. 

We  have  looked  into  the  testimony  in  the  case,  to  ascertain 
if  the  charge  of  fraud  against  the  defendant  Ogden  is  sustained 
by  the  testimony.  As  to  any  personal  fraud,  it  is  clear  he  was 
not  guilty  of  any,  for  he  was  absent  in  Europe  during  all  the 
time  the  negotiations  of  his  firm  with  Smith,  for  the  sale  of  the 
plaintiffs  lands,  were  carried  on,  and  did  not  return  until  about 
the  time  the  complaint  in  this  action  was  verified.  The  plaintiff 
entirely  failed  to  show  any  fraud  on  the  part  of  the  firm  or  the 
defendant  Ogden,  of  such  a  character  as  would  make  them  re- 
sponsible in  damages  for  the  sale  of  the  lands  to  Smith.  The 
testimony  fully  sustains  the  position  that,  at  the  time  of  the  sale, 
the  price  paid,  or  agreed  to  be  paid,  was  fair  and  adequate,  and 
that  the  purchase-money  was  .adequately  secured ;  and  it  fails  to 
show  that  Ogden's  firm,  or  any  member  of  it,  had  any  interest 
in  the  purchase.  The  affirmance  of  the  sale  by  the  plaintiff  is 
a  complete  answer  to  the  claim  for  damages  against  the  firm  for 
fraud  in  making  the  sale.  In  the  case  of  Watts  v.  Massie,  6 
Cranch,  148,  one  Anderson,  who  made  the  survey  which,  it  was 
alleged,  Massie  had  located  in  his  own  name  instead  of  that  of 
his  principal,  was  made  a  party  defendant,  charging  him  Avith 
fraud  in  making  the  survey.  On  the  hearing,  the  complaint 
was  dismissed,  with  costs,  as  to  Anderson,  and  a  decree  made 
against  Massie,  which  was  affirmed  by  the  Supreme  Court  on 
appeal.  A  proper  disposition  of  this  cause,  as  to  the  defendant 
Ogden,  would  have  been  to  have  dismissed  the  complaint  as  to 
him.  The  Supreme  Court,  at  general  term,  having  reversed 
the  judgment  of  the  special  term  and  granted  a  new  trial,  and 
the  plaintiff  having  appealed  therefrom,  and  stipulated  that,  if  it 


122  GARDNER  v.  OGDEN, 

should  be  affirmed,  jugment  absolute  might  be  enacted  against 
him,  it  is  now  proper  to  affirm  that  order  as  to  the  defendant 
Ogden,  and  render  judgment  absolute  in  his  favor,  by  dismissing 
the  complaint  as  to  him,  with  costs. 

It  now  only  remains  to  consider  the  cause  of  action  against 
the  defendant  Smith.  It  proceeds  upon  the  ground  that  Smith 
stood  in  such  relation  of  confidence  to  the  plaintiff  that  the  pur- 
chase made  by  him  was  made  as  the  plaintiff's  trustee,  and  that 
he  can  derive  no  benefit  therefrom.  This  leads  to  an  examina- 
tion of  the  main  and  important  question  in  the  case.  It  is  to 
be  observed,  in  the  commencement,  that  Ogden,  Jones  &  Co. 
were  the  conceded  agents  of  the  plaintiff:  as  such,  they  owed  a 
duty  to  him  to  manage  and  dispose  of  his  property  to  the  best 
advantage.  It  is  admitted  by  the  answer  that  Hathaway  and 
the  defendant  Smith  were  clerks  of  the  firm  during  the  years 
1852,  1853,  and  up  to  July  12,  1854.  As  such,  they,  of  course, 
had  access  to  the  correspondence  of  the  firm,  were  \vell  ac- 
quainted with  the  plaintiff's  urgency  to  sell,  his  motives  for  so 
doing,  and  all  the  facts  and  circumstances  connected  with  the 
property  known  to  the  plaintiff's  agents ;  and,  as  the  clerks  of 
the  firm,  they  owed  the  same  duty  to  the  plaintiff.  This  view 
is  much  strengthened  by  the  circumstance  that  all  the  corre- 
spondence with  the  plaintiff  relating  to  the  sale  was  carried  on 
by  Hathaway  in  the  name  of  the  firm  ;  though,  in  the  important 
letter  of  October  26,  1853,  his  name  does  not  appear  as  the 
writer.  It  was  written,  apparently,  by  the  firm,  and  signed  in 
their  name.  A  circumstance  is  disclosed  in  the  proof,  which 
tends  strongly  to  the  inference  that  Hathaway  was  either  inter- 
ested in  this  purchase  from  the  beginning  or  intended  so  to  be. 
I  am  strongly  impressed  with  the  conviction  that  he  was  orig- 
inally a  party  in  interest.  It  appears  that  the  plaintiff  and  his 
sister,  Mrs.  Hall,  were  the  owners  jointly  of  block  No.  1,  Car- 
penter's addition,  in  Chicago,  and  of  lots  4  and  5  in  block  1 7 ; 
that  the  firm  of  Ogden,  Jones  &  Co.  had  charge  of  this  property, 
and,  in  the  Spring  of  1852,  they  made  partition  thereof  between 
Mrs.  Hall  and  the  plaintiff,  valuing  each  share  at  $5,560.  Hath- 
away, in  the  letter  of  January  13,  1854,  informs  the  plaintiff 
that  he  had  become  the  owner  of  Mrs.  Hall's  lots ;  and  this  cir- 
cumstance presents  a  motive  on  his  part  to  become  the  owner 


IN  THE  COURT  OF  APPEALS  OF  NEW  YORK.  123 

of,  or  interested  in,  the  share  of  the  lots  owned  by  the  plaintiff. 
In  addition  to  this,  he  became  equally  bound,  with  Smith,  for 
the  payment  of  the  purchase  money,  and  this,  coupled  with  the 
conceded  fact  that  he  is  now  interested  with  him,  leads  to  the 
inevitable  conclusion  that  he  was  so  originally,  or,  at  least,  in- 
tended to  be.  If  Ogden,  Jones  &  Co.  had  become  the  pur- 
chasers, instead  of  their  clerks,  Smith  and  Hathaway,  what  would 
have  been  the  plaintiff's  rights  in  the  premises  ? 

[The  Court  next  proceed  to  a  general  examination  of  the 
law  affecting  trustees,  most  of  which  is  a  review  and  considera- 
tion of  the  leading  authorities  printed  and  referred  to  herein. 
To  give  this  part  of  the  opinion,  would  be,  to  a  great  extent,  a 
repetition  of  what  is  stated  in  Davoue  v.  Fanning,  preceding, 
page  1 ;  Aberdeen  Eailway  Company  v.  Blaikie,  page  76 ;  and 
the  other  cases  therein  referred  to,  and  it  is  therefore  omitted. 
The  object  of  reprinting  this  case  is,  mainly,  to  show  how  far 
Smith,  the  defendant,  clerk  to  the  trustees  or  agents,  is  affected 
as  a  purchaser  by  reason  of  that  relation ;  and  that  part  of  the 
opinion  closes  the  case.] 

It  is  undeniable,  from  these  authorities,  that  if  the  purchase 
in  this  case  had  been  made  by  the  firm  of  Ogden,  Jones  &  Co., 
it  could  not  be  sustained.  Does  the  same  principle  apply  to  the 
purchase  made  by  Smith,  their  clerk  ?  It  is  not  perceived  upon 
what  substantial  ground  a  distinction  can  be  drawn.  Whatever 
duty  his  principals  owed  to  the  plaintiff,  he  equally  owed  the 
same.  The  rule,  as  we  have  seen,  as  laid  down  by  Sugden,  and 
which  the  authorities  sustain,  is,  that  the  disability  extends  to 
all  persons  who,  being  employed  or  concerned  in  the  affairs  of 
another,  acquired  a  knowledge  of  his  property.  Now,  it  is  un- 
deniable that  Hathaway  and  Smith  were  employed  or  concerned 
in  the  affairs  of  the  plaintiff  relating  to  these  lands,  and  acquired 
knowledge  concerning  them.  The  defendant  Smith  was  the 
clerk,  or  assistant,  of  his  principals.  He  was  their  agent,  and 
employed  in  and  about  their  business.  Whatever  disabilities 
they  labored  under,  equally  attached  to  him.  It  would  work  an 
entire  abrogation  of  the  rule  to  hold  the  principal  subject  to  the 
operation  of  this  rule,  and  exempt  his  clerks  and  agents  from 
its  effect.  It  would  be  opening  the  door  to  its  evasion,  so  that 
it  would  lose  all  its  vitality  and  virtue.  The  courts  have  not  so 


124  GARDNER  v.  OGDEN. 

dealt  with  the  application  of  this  rule.  It  has  been  held  that 
the  partners  in  business  of  an  assignee  in  bankruptcy  are 
equally  disqualified  from  purchasing  as  the  assignee  himself, 
ex  parte  Barnett,  7  Jurist,  116.  It  has  been  held  to  disqualify 
the  solicitor  to  a  commission  in  bankruptcy  from  becoming  a 
purchaser  at  a  sale  of  the  bankrupt's  effects,  Owen  v.  Foulkes,  6 
Vesey,  630,  n.b. ;  ex  parte  James,  8  Id.  337;  ex  parte  Linwood, 
and  ex  parte  Churchill,  before  Lord  ROSSLYN,  cited  8  Id.  343 ; 
ex  parteBennett,  10  Id.  381.  The  precise  point  now  under  con- 
sideration arose  before  Vice-Chancellor  SANDFOKD  in  Poillon  v. 
Martin,  1  Saund.  Ch.  569,  where  he  held  that  the  clerk  of  an 
attorney  was  as  much  prohibited  fi'om  purchasing  from  a  client 
as  the  attorney  himself;  that  the  principle  of  the  rule  extended 
as  well  to  him  as  to  the  attorney  himself.  I  think  this  is 
the  spirit  of  all  the  authorities,  and  that  the  honesty  and  fair- 
ness of  transactions  between  principals  and  their  agents  demand 
a  firm  adherence  to  these  rules,  and  to  bring  within  their  oper- 
ation, not  only  the  agent  himself,  but  those  in  his  immediate 
employ,  and  who  are  engaged  in  the  transaction  of  his  business, 
which  is,  necessarily,  the  business  of  the  agent's  principal.  It 
can  not  be  disguised  that  this  sale  was  negotiated  by  one  clerk 
with  another  clerk  of  the  plaintiff's  agents.  AU  the  mischiefs 
which  the  rules  adverted  to  were  designed  to  prevent,  are  ap- 
parent in  this  case.  Assuming  that  it  has  been  shown  that  the 
purchase  made  by  Smith  is  obnoxious  to  the  objections  which 
have  been  urged,  it  follows  that  the  plaintiff  is  entitled  to  a  re- 
conveyance of  his  lands.  But  as  it  appears  that  Smith,  by  his 
own  act,  in  selling  a  portion  of  these  lands,  is  incapable  of  doing 
that  equity  which  the  law  commands,  it  follows  that  the  plaintiff 
is  entitled  to  the  proceeds  of  such  sales.  The  decree,  or  judg- 
ment, of  the  special  term  was,  therefore,  correct,  in  requiring 
him  to  reconvey  to  the  plaintiff  all  such  portions  of  the  lands  as 
remain  unsold,  and  to  account  to  him  and  pay  over  the  proceeds 
of  all  those  parts  which  have  been  sold.  We  see  no  objection 
which  Smith  can  properly  make  to  that  part  of  the  decree 
which  gives  to  him  the  election  to  pay  to  the  plaintiff  the  ascer- 
tained value  of  the  plaintiff's  lands  in  lieu  of  such  reconveyance 
and  accounting. 

The  order  at  the  general  term,  granting  a  new  trial,  so  far 


GOODIN 


v.  WHITEWATER  CANAL  CO.     /  1 £   —  125  —  |^  fe  4 


as  it  relates  to  the  defendant  Smith,  is  reversed,  and  the  judg- 
ment at  the  special  term  as  to  him  affirmed  with  costs.  And 
the  order  at  the  general  term,  granting  a  new  trial  as  to  the  de- 
fendant Ogden,  is  affirmed,  and,  in  pursuance  of  the  plaintiff's 
stipulation,  judgment  absolute  is  rendered  against  him  in  favor 
of  the  defendant  Ogden,  by  the  dismissal  of  the  complaint 
against  him,  with  costs.  ORDERED  ACCORDINGLY. 
All  the  judges  concurring. 


GOODIN  v.  THE  CINCINNATI  AND  WHITEWATER  CANAL 
COMPANY,  et  al. 

[  This  case  was  decided  by  the  Supreme  Court  of  the  State  of  Ohio,  at 
its  Decetnber  term,  1868,  before  Chief  Justice  LUTHER  DAY,  and  JACOB 
BRINKERHOFF,  JOSIAH  SCOTT,  JOHN  WELCH,  and  WILLIAM  WHITE, 
Judges,  Judge  WELCH  delivering  the  unanimous  opinion  of  the  Caurt. 
Reported  in  18  Ohio  State  Reports,  169.] 

The  owner  of  land  who  stands  by,  without  objection,  and  sees  a  public  railroad 
constructed  over  it,  can  not,  after  the  road  is  completed,  or  large  expendi- 
tures have  been  made  thereon  upon  the  faith  of  his  apparent  acquiescence, 
reclaim  the  land,  or  enjoin  its  use  by  the  railroad  company.  In  such  case 
there  can  only  remain  to  the  owner  a  right  of  compensation. 

As  a  general  rule,  the  property  of  a  corporation  is  a  trust,  fund  for  the  benefit 
of  its  creditors  and  stockholdei'S,  and  they  may,  in  all  cases  where  it  has 
been  fraudulently  or  wrongfully  disposed  of  by  the  directors,  pursue  it  into 
the  hands  of  purchasers  with  notice,  and  assert  their  lien  upon  it,  or  their 
claims  for  its  value. 

A  railroad  company,  having  purchased  a  majority  of  the  shares  of  stock  in  a 
canal  company,  elected  for  the  latter  a  board  of  directors  who  were  in  the 
interest  of  the  railroad  company,  and  then,  with  the  assent  of  said  board,  ap- 
propriated the  entire  canal  and  property  of  the  canal  company  as  a  railroad 
track,  paying  therefor  a  price  or  compensation  which  was  agreed  upon  by 
the  directors  of  the  two  companies,  but  which  was  far  below  the  actual  value 
of  the  property.  Held,  that  although  the  stockholders  and  creditors  of  the 
canal  company  can  not,  after  the  road  has  been  completed,  reclaim  the 
property,  or  enjoin  its  use,  yet  they  are  not  concluded  by  such  agreement, 
so  far  as  regards  the  price  of  the  property,  but  may,  by  action,  compel  the 
railroad  company  to  account  for  its  additional  value. 

The  rule  of  valuation  in  such  cases  is,  what  the  interest  of  the  canal  company 
was  worth,  not  for  canal  purposes  merely,  or  for  any  other  particular  use, 
but  what  it  was  worth  generally,  for  any  and  all  uses  for  which  it  might 
be  suitable. 


126  GOOD  IN  v.  WHITEWATER  CANAL  CO., 

ERROR  to  the  Court  of  Common  Pleas  of  Hamilton  County. 
Reserved  in  the  District  Court. 

The  Cincinnati  and  Whitewater  Canal  Company  was  incor- 
porated in  1837,  under  a  local  act  of  that  date  (55  O.  L.  393), 
and  soon  thereafter  constructed  its  canal  from  Cincinnati  to  the 
Indiana  state  line,  near  Harrison. 

The  Indianapolis  and  Cincinnati  Railroad  Company  was  sub- 
sequently chartered  under  the  laws  of  Indiana,  and  constructed 
its  road  from  Indianapolis  to  a  point  at  or  near  the  said  western 
terminus  of  the  canal. 

Prior  to  1862,  the  latter  company  used  the  Ohio  and  Mis- 
sissippi Railroad  for  transportation  of  its  cars  from  that  point  to 
Cincinnati.  But  in  1862,  desiring  to  have  an  independent  ap- 
proach from  Harrison  to  Cincinnati,  the  said  Indianapolis  and 
Cincinnati  Railroad  Company,  by  its  officers  and  agents,  took 
stock  in  and  organized  a  new  railroad  company,  under  the  laws 
of  Ohio,  by  the  name  of  the  Cincinnati  and  Indiana  Railroad 
Company.  The  object  of  this  movement  was  to  obtain  control 
of  the  canal,  and  convert  it  into  a  railroad  track.  As  means  to 
this  end,  the  two  railroad  companies,  acting  through  their  com- 
mon president,  Henry  C.  Lord,  bought  up,  at  nominal  or  very 
low  rates,  more  than  half  the  stock  of  the  canal  company,  and 
with  the  power  thus  acquired,  reorganized  its  board  of  directors, 
putting  in  place  of  the  old  directory  members  who  were  in  the 
interest  of  the  railroad  companies,  with  Mr.  Lord  at  their  head 
as  president,  who  thus  became  president  of  all  three  of  the 
companies. 

A  formal  proceeding  was  then  had  before  the  probate  judge 
of  Hamilton  County,  at  the  instance,  or  rather  in  the  name,  of 
the  Cincinnati  and  Indiana  Railroad  Company,  against  the  canal 
company,  for  the  condemnation  of  the  canal,  its  bed,  embank- 
ments, fixtures,  rights  of  way,  grounds,  etc.,  as  a  track,  and  for 
the  uses  of  the  new  railroad  company.  In  this  proceeding,  by 
agreement  of  parties — that  is,  by  agreement  of  the  two  boards 
of  directors  thus  constituted — a  jury  was  dispensed  with,  the 
amount  of  compensation  and  damages  fixed  at  fifty-five  thousand 
dollars,  and  the  property  condemned  to  the  use  of  the  Cincinnati 
and  Indiana  Railroad  Company. 

At  the  time  of  this  proceeding,  the  canal  company  was,  as  it 


IN  THE  SUPREME  COURT  OF  OHIO.  127 

» 

still  is,  largely  in  debt.  It  had  executed  for  the  security  of  its 
creditors  three  several  mortgages  upon  its  entire  property. 
These  mortgages  were  then  in  suit  in  the  District  Court  of 
Hamilton  County,  at  the  instance  of  the  mortgagees,  in  an  action 
entitled  L'Hommedieu,  et  al,  v.  Cincinnati  and  Whitewater  Canal 
Company.  In  that  action  an  interlocutory  order  had  been  made 
for  the  sale  of  the  canal  and  appurtenances,  and  under  this  order 
the  property  had  been  appraised  at  $55,000,  the  same  amount 
so  agreed-  upon  by  the  parties  to  the  condemnation  proceeding. 
It  seems  the  railroad  companies,  acting  through  Mr.  Lord,  their 
president,  had  also  bought  up,  at  nominal  or  very  low  prices,  a 
controlling  amount  of  the  mortgage  debts  represented  in  the  ac- 
tion, and  thereupon  had  procured  a  stay  of  proceedings  under 
the  interlocutory  order  of  sale,  and  an  order  of  the  district 
court  placing  said  sum  of  $55,000  in  the  hands  of  Mr.  Lord,  as 
receiver  in  the  case,  in  lieu  of  the  canal  property  so  ordered  to 
be  sold.  Mr.  Lord,  thereupon,  as  president  of  the  Cincinnati 
and  Indiana  Railroad  Company,  drew  his  check  upon  the  funds 
of  the  company  in  bank,  for  the  $55,000,  and  delivered  the 
check  to  himself,  as  receiver  in  the  case,  for  the  benefit  of  the 
mortgage  creditors ;  and  thus  paid  to  the  canal  company  the 
amount  of  the  condemnation  money. 

Immediately  after  these  proceedings  of  condemnation,  the 
Cincinnati  and  Indiana  Railroad  Company  took  possession  of  the 
canal,  and  proceeded  to  lay  its  road  upon  the  banks  and  bed 
thereof,  and  to  appropriate  its  entire  way,  basins,  bridges,  tun- 
nels, aqueducts,  and  other  fixtures,  to  the  use  of  its  railroad  ;  and 
the  canal  was  utterly  abandoned  and  despoiled  as  such,  the  canal 
company  from  that  time  ceasing  to  exercise  any  control  over  the 
property. 

In  December,  1864,  after  the  Cincinnati  and  Indiana  Railroad 
Company  had  completed  its  road,  with  depots,  machine-shops, 
turn-tables,  and  other  necessary  fixtures  and  appendages,  at  an 
aggregate  cost  of  over  a  million  of  dollars,  and  after  the  same  had 
been  equipped,  and  put  in  running  operation,  and  permanently 
leased  to  the  Indianapolis  and  Cincinnati  Railroad  Company,  the 
plaintiffs,  James  and  Samuel  Goodin,  who  are  owners  of  some  of 
the  stock,  as  well  as  of  part  of  the  debts  of  the  canal  company, 
filed  their  original  petition  in  this  case,  making  the  three  corpora- 


128  GOODIN  v.  WHITEWATER  CANAL  CO., 

tions,  as  well  as  some  of  their  individual  officers,  who  took  an 
active  part  in  the  proceedings  complained  of,  parties  defendant. 
The  plaintiffs  ask  that  the  pretended  sale,  or  condemnation  of  the 
canal  property,  may  be  set  aside  as  a  fraud  upon  the  minority  of 
the  stockholders  and  creditors,  who  did  not  participate  therein  ; 
that  the  railroad  companies  may  be  enjoined  from  further  using 
the  line  and  fixtures  of  the  canal  for  railroad  purposes ;  or,  if 
neither  of  these  remedies  can  be  granted,  then  they  ask  that  the 
two  railroad  companies  may  be  adjudged  to  hold  the  property  as 
trustees,  and  compelled  to  account  for  the  full  value  of  the  same 
to  the  canal  company,  or  to  its  stockholders  and  creditors  j  and 
for  other  relief. 

On  the  hearing  in  the  Common  Pleas,  the  court  held  the  pro- 
ceedings of  condemnation  to  be  valid,  and  that  the  plaintiffs  were 
not  entitled  to  any  relief,  and  their  petition  was  ^accordingly  dis- 
missed. A  bill  of  exceptions,  taken  by  the  plaintiffs  on  the  hear- 
ing, sets  forth  all  the  evidence  in  the  cause,  and  shows  that  a 
motion  of  the  plaintiffs  for  a  new  trial,  predicated  upon  the  alleged 
ground,  that  the  finding  of  the  court  was  against  the  law  and 
evidence,  was  overruled. 

By  the  testimony  set  forth  in  the  bill  of  exceptions,  it  appears 
that  the  canal  property  so  condemned  at  the  time  of  its  appropria- 
tion, was  of  little  if  any  more  value,  to  be  used  merely  as  a  canal, 
than  the  sum  agreed  upon,  to  wit,  the  sum  of  $55,000  ;  but  that 
for  railroad  purposes,  or  for  general  purposes,  it  was  worth  a 
much  larger  sum.  The  witnesses,  however,  who  put  this  high 
estimate  upon  the  value  of  the  property,  do  so  upon  the  supposi- 
tion or  conviction,  that  the  abandonment  of  the  canal  did  not 
work  a  reversion  of  the  property,  or  right  of  way,  to  the  original 
proprietors,  but  that  the  same  could  lawfully  be  transferred  by 
the  canal  company,  or  condemned  in  its  hands  for  the  uses  of  a 
railroad.  The  bill  of  exceptions  also  shows  that  testimony  offered 
by  the  plaintiffs  to  prove  the  value  of  the  property  for  railroad 
purposes,  or  for  general  purposes,  and  not  merely  for  the  uses  of 
a  canal,  was  refused  by  the  court,  and  that  the  plaintiffs  excepted 
to  the  order  of  refusal. 

A  petition  in  errror  to  reverse  the  judgment  of  the  Common 
Pleas  was  filed  by  the  plaintiffs  in  the  District  Court,  and  has 
been  reserved  for  decision  here. 


IN  THE  SUPREME  COURT  OF    OHIO.  129 

The  assignments  of  error  are,  substantially,  that  the  court 
erred : 

1.  In  rejecting  the  testimony  so  offered  by  the  plaintiffs. 

2.  In  refusing  a  new  trial. 

3.  In  dismissing  the  plaintiffs'  petition,  and  refusing  the  relief 
sought. 

T.  W.  Hartley,  for  plaintiffs.     G.  E.  Pugh,  for  defendants. 

WELCH,  J.  The  question  mainly  argued  in  this  case  is, 
whether  by  the  laws  of  Ohio,  and  particularly  under  the  twelfth 
section  of  the  General  Railroad  Act  (1  S.  &  C.  278),  there  is  any 
power  given  by  which  a  canal  can  be  condemned  and  converted 
into  a  railroad  against  the  will  of  the  owners  of  the  canal.  We 
think  the  question  does  not  necessarily  arise  in  the  case,  and 
therefore  leave  it  undetermined.  It  is  a  question  which  the 
plaintiffs  are  not  in  a  position  to  raise.  Where  a  party  stands  by, 
as  we  must  presume  the  plaintiffs  to  have  done  in  the  present 
case,  and  silently  sees  a  public  railroad  constructed  upon  his 
land,  it  is  too  late  for  him,  after  the  road  is  completed,  or  large 
sums  have  been  expended  on  the  faith  of  his  apparent  acquies- 
ence,  to  seek,  by  injunction  or  otherwise,  to  deny  to  the  railroad 
company  the  right  to  use  the  property.  Considerations  of  pub- 
lic policy,  as  well  as  recognized  principles  of  justice  between 
parties,  require  that  we  should  hold,  in  such  cases,  that  the  prop- 
erty of  the  owner  can  not  be  reclaimed,  and  that  there  only  re- 
mains to  him  a  right  of  compensation.  The  injunction  in  the 
present  case  might  have  been  sought  at  the  first  known  attempt, 
or  even  threat,  to  despoil  the  canal,  or  to  construct  the  railroad 
upon  its  line.  The  omission  to  do  so  is  an  implied  assent.  The 
work  being  completed,  the  public,  as  well  as  those  directly  inter- 
ested in  the  road  as  stockholders  and  creditors,  have  a  right  to 
insist  on  the  application  of  the  rule  that  he  who  will  not  speak 
when  he  should,  will  not  be  allowed  to  speak  when  he  would.  So 
far,  therefore,  as  regards  the  relief  by  way  of  injunction,  or  the 
right  of  the  Cincinnati  and  Indiana  Railroad  Company  to  the 
continued  use  of  the  property,  we  deem  it  quite  immaterial 
whether  the  proceedings  of  condemnation  and  appropriation  are 
void  or  valid  ;  or  if  void,  whether  they  are  so  for  want  of  power 
in  the  railroad  company  to  condemn,  for  want  of  power  in  the 

9 


130  GOODIN  v.  WHITEWATER  CANAL  CO., 

canal  company  to  agree  upon  the  price,  or  for  want  of  an  assess- 
ment by  a  jury.  It  is  enough  to  know  that  the  appropria- 
tion has  in  fact  been  made,  and  that  the  plaintiffs  have  de- 
layed their  suit  so  long,  and  under  such  circumstances,  that  to 
grant  the  request  now  would  work  a  great  public  injury,  and 
be  a  virtual  fraud  upon  the  Cincinnati  and  Indiana  Railrotid 
Company. 

The  case  is  fairly  within  the  principle  settled  in  that  of 
Chapman  &  Harlmess  v.  Railroad  Companies,  6  Ohio  St.  136. 
It  may  well  be  said  in  the  present  case,  as  the  court  said  in  the 
case  referred  to:  "Before  a  stockholder  can  be  entitled  to  a 
remedy  by  injunction  against  such  departure  from  the  original 
objects  of  the  incorporation,  he  must  have  shown  himself  prompt 
and  vigilant  in  the  assertion  of  his  rights  as  such  stockholder. 
It  will  not  do  for  him  to  wait  until  the  mischief  of  which  he 
complains  is  accomplished,  fortunes  expended,  and  great  public 
interests  created.  If  he  does,  he  must  be  held  to  have  acqui- 
esced in  the  change,  or  to  content  himself  with  some  other  form 
of  remedy.'' 

Precisely  the  same  point  was  determined  in  Kellogg  v. 
Ely,  15  Ohio  St.  64,  where  the  court  say,  when  speaking  of 
the  plaintiff's  .right  to  an  injunction :  "  Remaining  inactive 
and  silent  until  his  swamp-lands  were  drained  by  a  ditch  of 
nearly  a  mile  in  length,  he  then,  for  the  first  time,  asks  the 
interposition  of  a  court  of  equity.  We  think  he  comes  too 
late  "(a). 

(a)  In  Ohio,  the  forms  of  actions  are  abolished,  and  all  suits  are  brought  by 
petition,  without  at  all  interfering  with  the  principles  governing  suits  at  law  or 
in  equity.  Consequently,  in  the  suit  of  Goodin  v.  The  Whitewater  Canal  Company, 
above,  although  in  the  nature  of  a  suit  in  equity  to  establish  a  trust,  the  doctrines 
of  estoppel,  both  in  law  and  in  equity,  were  applied  to  the  case. 

As  the  rules  governing  ESTOPPELS,  or  RATIFICATION,  or  ACQUIESCENCE,  arise 
in  almost  every  case  involving  the  fiduciary  relation,  reference  is  here  made  (as 
has  heretofore  been  done)  to  many  cases  bearing  thereon,  and  extended  extracts 
given  at  length  from  others. 

ESTOPPEL  IN  LAW. — The  Court,  Judge  SWAN  delivering  the  opinion,  in 
M'Affcrtij  v.  Conner's  Lessee,  1  Ohio  St.  105,  thus  defines  estoppel:  "A  party  will 
be  concluded  from  denying  his  own  acts  or  admissions,  which  were  expressly  de- 
signed to  influence  the  conduct  of  another,  and  did  so  influence  it,  and  when  such 
denial  will  opemte  to  the  injury  of  the  latter."  "The  declaration  of  the  party 
sought  to  be  estopped  in  pais  must  be  willful."  This  is  the  rule  first  adopted  in 
equity,  and  afterward  followed  in  law. 


IN  THE  SUPREME  COURT  OF  OHIO.  131 

The  question  of  compensation,  however,  stands  upon  a  very 
different  basis.  The  railroad  company,  having  acquired  this 
property,  ought  to  pay  for  it  a  fair  value,  unless,  by  an  agree- 
ment between  the  parties,  such  as  a  court  of  equity  will  uphold, 
a  less  price  has  been  fixed.  Was  $55,000,  then,  a  fair  value 
for  the  property  ?  And  if  not,  did  the  parties,  by  a  valid  agree- 
ment, fix  upon  a  less  sum?  These,  it  seems  to  us,  are  the  only 
questions  remaining  in  the  case,  and  we  are  constrained  to  an- 
swer them  both  in  the  negative.  We  think  the  price  was 
grossly  inadequate,  and  that  the  agreement  can  not  be  sustained 
in  a  court  of  equity. 

In  the  case  of  Hatch  v.  The  Cincinnati  and  Indiana  Railroad 

"A  party  setting  up  estoppel  must  establish  that  he  had  been  induced,  by 
his  faith  in,  or  reliance  upon,  the  assertion  or  acts  of  such  party  to  the  contrary, 
to  do  some  act  or  incur  some  liability,  which  would  make  it  injurious  to,  or  a  fraud 
upon,  him,  to  allow  such  truth  to  be  shown,"  Garlinghouse  v.  Whitwell,  51  Bar- 
bour,  208. 

Estoppel  in  pais  is  never  allowed  to  be  used  as  an  instrument  of  fraud,  but 
only  to  prevent  injustice,  Pierepont  v.  Barnard,  5  Barbour,  3G4. 

Copeland-v.  Copeland,  28  Maine  (1848),  525:  Introductory  note  in  the  case, 
which  was  an  ejectment:  "At  law,  as  well  as  in  equity,  where  one,  by  his  words 
or  conduct,  willfully  causes  another  to  believe  the  existence  of  a  certain  state 
of  things,  and  induces  him  to  act  upon  that  belief,  so  as  to  alter  his  own  previous 
position,  the  former  is  concluded  from  averring,  against  the  latter,  a  diiferent 
state  of  things  as  existing  at  the  same  time."  "  But  several  things  are  essential 
to  be  made  out  at  the  same  time ;  the  first  is,  that  the  act  or  declaration  of  the 
person  must  be  willful — that  is,  with  knowledge  of  the  facts  upon  which  any 
right  he  may  have  must  depend,  or  with  an  intention  to  deceive  the  other  party ; 
lie  must,  at  least  it  would  seem,  be  aware  that  he  is  giving  countenance  to  the 
alteration  of  the  conduct  of  the  other,  whereby  he  will  be  injured  if  the  representa- 
tion is  untrue;  and  the  other  must  appear  to  have  changed  his  position  by  reason  of 
such  inducement.'' 

Tilghman  v.  West,  8  Iredell's  N.  C.  R.  in  Eq.  (1851),  184:  Estoppel  set  up 
against  plaintiffs  on  the  ground  that  they  were  present  at  sale  of  slaves,  and  did 
not  forbid  it.  The  court  say:  "The  silence  is  explained  by  their  ignorance  of  the 
fact."  "Fraud  can  not  exist  as  a  matter  of  fact  when  the  intent  to  deceive  does 
not  exist." 

Davidson  v.  Barclay,  3G  Penn.  R.  40G:  Barclay  was  in  the  army  when  David- 
son, his  lessor,  sued  for  alleged  rent  due,  and  to  forfeit  right  of  purchase,  not 
making  Barclay  defendant  (as  the  laws  of  Pennsylvania  prevented  suit 'against 
soldiers,  and  Barclay  was  in  the  army),  but  tenant  and  his  mother-in-law,  a 
member  of  his  family.  Got  possession  and  improved.  Barclny  returned  home, 
and  remained  quiet  for  two  years  before  suing.  Previously,  Davidson  had  expended 
$4,000  in  improvements,  and  during  the  two  years  after  Barclay's  return,  $2,700. 
Held,  pp.  416-7,  that  no  estoppel  existed  against  Barclay — "silence  estops  only 
when  it  is  fraud."  That  Barclay  was  not  bound  to  pay  the  $4,000  spent  before 


132  GOODIN  v.  WHITEWATER   CANAL  CO., 

Company,  decided  at  the  present  term  of  this  Court,  the  railroad 
company  claimed,  and  the  Court  held,  that  the  appropriation  of 
the  canal  to  railroad  purposes  did  not  work  a  reversion  of  the 
property  to  the  original  proprietors.  In  other  words,  that  the 
canal  company  had  a  perpetual  easement  in  the  property,  which 
was  transferrable  to  a  railroad  company,  and  of  course  were  enti- 
tled to  receive  a  full  compensation  therefor.  The  court  below. 
in  the  present  case,  refused  to  hear  evidence  of  value  based  upon 
that  view  of  the  law,  but  enough  of  evidence  appears  in  the  bill 
of  exceptions,  notwithstanding  the  refusal  of  the  court,  to  show 
that  the  property  was  worth  vastly  more  than  $55,000,  the  price 
paid.  True,  the  evidence  shows  that  the  property  was  of  little 

his  return,  but  was  the  $2,700,  on  equitable  principles;  that  he  was  asking  equity 
and  must  do  equity. 

Commonwealth  v.  Moltz,  10  Penn.  530:  An  important  case^  in  which  the  ques- 
tion, What  in  law  constitutes  an  estoppel  in  pain?  is  fully  examined,  and  many 
authorities  cited.  Some  of  the  authorities  show  i\\n,\  fraud  must  exist. — in  others, 
that  the  silence  must  put  the  injured  party  in  a  different  position.  Per  curia, 
p.  532:  "  In  this  particular,  the  defense,  founded  on  estoppel,  differs  from  a  plea  of 
the  statute  of  limitations,  which,  by  positive  law,  the  mere  lapse  of  time  creates 
a  flat  bar,  and  it  is,  therefore,  incumbent  on  the  party  who  would  take  his  case 
from  under  the  operation  of  the  act,  to  prove  the  exception.  But  he  who  avers 
an  estoppel,  either  by  pleading  or  evidence,  must  establish  by  proofs,  positive  or 
circumstantial,  every  fact  that  essentially  enters  into  the  character  of  such  a 
reply  to  the  plaintiff's  suit.  It  is  to  be  considered  that  the  doctrine  of  estoppel 
is  an  exception  to  the  general  rule  for  the  prevention  of  fraud,  and  is  not  to  be 
extended  beyond  the  reasons  ou  which  it,  is  founded."  Acquiescence  by  time  was 
claimed  in  this  case. 

Todd\.  Wheeler,  1  Dana,  401:  In  chancery  to  recover  land.  In  1819,  by 
entry  on  consent  of  counsel,  defendant  waived  right  to  set  up  statute  of  limita- 
tions, and  plaintiff  the  right  to  remove  the  case  to  the  Federal  court  (which  he 
Lad  not).  In  1825  defendant  moved  to  set  aside  this  agreement.  In  1827  defend- 
ant filed  affidavits  that  the  agreement  of  1819  was  made  by  attorney  without 
consent  of  defendant,  and  on  trial  of  merits,  the  agreement  was  set  aside.  Not- 
withstanding the  court  say  defendant  had  knowledge  of  it  immediately  after  the 
agreement  of  1819,  and  the  delay  was  unreasonable,  still  they  were  not  estopped, 
because  they  hud  given  a  substantial  defense  for  nothing. 

EQUITABLE  ESTOPPEL. — Foster  v.  Shrcve,  6  Bush,  529:  A  late  case,  in  which 
eight  years'  acquiescence  was  held  to  bind  parties  in  which  real  estate  was  in- 
volved.and  what  consituted  an  "equitalle  estoppel"  defined.  Page  530,  sec.  1542,  of 
Story's  Eq.  Jurisprudence,  is  referred  to  and  approved,  in  which  the  party  is  held, 
if  "  he  THEREBY  induces  others  to  do  that  which  they  might  otherwise  have  abstained'* 
from  doing,  he  can  not  afterward  question  the  act,  as  where  the  interested  party 
MM  money  paid  and  dors  not  assert  his  right. 

Mitchell  v.  Moore,  0  Bush,  GUI:  The  trustee  purchased,  having  funds  of  eestui 
in  his  hands  to  pay  for  the  land.  The  eestui,  pending  litigation,  was  trying  to 


JN  THE  SUPREME  COURT  OF  OHIO.  133 

value  as  a  canal.  As  such,  in  the  language  of  defendants'  wit- 
nesses, it  was  "  played  out."  It  seems  to  have  been  as  such  that 
it  was  appraised,  upon  the  interlocutory  order  of  sale,'  and  as 
such  it  Inust  have  been  valued  by  the  two  boards  of  directors,  at 
the  time  of  its  sale  or  pro  forma  condemnation.  This  was  no  fair 
method  of  estimating  the  value  of  the  property.  The  true  value 
of  any  thing  is  what  it  is  worth,  when  applied  to  its  natural  and 
legitimate  uses — its  best  and  most  valuable  uses.  The  estimate 
should  have  been  of  its  value  generally — for  any  and  all  uses — 
and  not  for  any  particular,  and  especially  not  for  any  inferior  or 
inappropriate  use.  It  is  in  vain  to  say  that  the  property  is  worth 
little  to  the  canal  company,  because  they  have  no  power,  as  such, 

withdraw  them  by  legal  proceedings.  HARDIN.  J. :  "  Whether  or  not  paid  over/' 
the  cestui  "should  be  made  to  elect  whether  she  will  take  the  money  or  the  land." 

Martin  v.  Zellerback,  38  California,  300:  It  is  alleged  that  the  true  ground  is, 
that  the  party  to  be  estopped  "has  misled  another  to  his  prejudice."  To  constitute 
an  estoppel  it  must  appear,  1.  That  the  party  must  have  known  the  true  state  of 
his  own  title;  2.  That  done  to  deceive,  or  with  culpable  negligence;  3.  That  the 
party  affected  had  not  the  full  knowledge;  4.  That  he  relied  upon  such  admissions. 

Bankarl  V.  Tennant,  10  Equity  Cases,  L.  R.  S.  145.  Sir  W.  M.  JAMES,  V.  Ch.: 
"Plaintiffs  say  they  were  iu  actual  enjoyment  of  the  water  from  1849  to  1866; 
but  it  can  not  be  said  without  question,  because  the  very  same  question  which  is 
raised  by  this  suit  was,  in  fact,  raised  in  the  year  1852,  when  certain  letters 
passed  between  the  parties,  in  which,  on  one  side,  it  was  contended  that  there 
should  be  an  actual  grant  of  the  said  right  to  the  water,  and  on  the  other  side,  the 
grant  was  refused.  The  question  must  be,  in  fact,  considered  to  have  been  in 
abeyance  and  suspense  from  1852  down  to  the  present  time,  neither  party  being,  in 
my  judgment,  either  benefited  or  injured  by  any  thing  that  has  occurred  since 
the  year  1852.  It  must  be  tried,  therefore,  as  if  it  was  in  that  yeai-.1'  The  prin- 
ciple upon  which  an  estoppel  is  held  is  stated  on  page  146,  citing  Lord  KIXGS- 
DOWN,  in  Ramsden  v.  Dyson,  1  H.  L.  129:  "If  possession  is  taken  with  knowledge 
under  circumstances  that  possessor  has  good  reason  to  suppose  he  acquires  an 
interest,  and  expends  money,  equity -*vill  sustain  it,"tetc.  In  this  case,  the  defend- 
ant was  the  owner  of  a  canal  of  which  the  plaintiffs  were  large  customers,  and  a 
united  understanding  was  come  to  between  the  parties  that,  so  long  as  the  plaintiffs 
remained  good  customers  of  the  canal,  they  should  be  allowed  to  use  the  super- 
fluous water  thereof  for  the  purpose  of  copper-works,  of  which  they  were  occu- 
piers under  an  agreement  for  lease  with  the  defendant.  It  was  shown  that  the 
use  of  the  water  of  the  canal,  though  convenient  and  economical,  was  not  abso- 
lutely essential  to  the  plaintiffs'  works.  Held,  that  such  an  understanding  did 
not  form  the  foundation  of  an  equitable  right;  otherwise,  if  the  plaintiffs,  with 
the  knowledge  of  the  defendant,  had  incurred  expense  in  establishing  a  manu- 
facture for  which  the  use  of  the  water  was  absolutely  necessary. 

As  to  ACQUIESCENCE,  see  note  to  Oliver  v.  Piatt,  preceding,  page  38;  also  note 
to  York  and  North  Midland  Railway  Company  v.  Hudson,  preceding,  page  72 ;  also 
note  to  Baker  v.  Whiting,  hereinafter. 


134  GOODIN  v.  WHITEWATER  CANAL  CO., 

to  convert  it  into  a  railroad.  The  stockholders  and  creditors  of 
the  canal  company  could  organize  themselves  into  a  railroad  com- 
pany, at  any  time,  and  thus  realize  the  full  value  of  the  easement. 
But  even  if  they  could  not,  that  is  no  good  reason  why  their  prop- 
erty should  be  taken  from  them  at  less  than  its  real  value.  The 
railroad  company  should  pay  somebody  for  this  property.  She 
refuses  to  pay  the  original  owners  for  it,  because,  she  says,  the 
canal  company,  by  transferring  it  to  her,  prevented  its  relapse  to 
such  original  owners ;  and  she  refuses  to  pay  the  canal  company 
any  thing  more  than  a  nominal  price  for  it,  because,  she  says,  if 
the  canal  company  had  not  transferred  it  to  her,  it  ivould  have 
relapsed ;  and  as  the  result  of  this  logic  she  gets  the  property  for 
a  merely  nominal  price.  She  gets  it  as  a  kind  of  waif,  which, 
failing  to  find  an  owner,  somehow  falls  into  her  hands,  as  the  for- 
tunate finder.  The  insolvency  of  the  canal  company  is  a  poor 
reason  to  render  for  refusing  to  pay  her  a  fair  price  for  her  prop- 
erty. If  she  is  insolvent,  she  has  the  more  need  of  a  full  price. 

As  to  the  agreement,  by  which  the  price  or  compensation  was 
fixed  at  $55,000,  we  have  no  hesitation  in  saying  that  it  ought 
not  to  be  allowed  to  stand,  so  as  to  affect  the  rights  of  those  who 
gave  no  assent  thereto.  Without  attempting  to  decide  as  to  the 
power  of  directors,  in  the  absence  of  authority  given  by  the 
stockholders,  to  fix  a  price  or  compensation  for  the  property  so 
sought  to  be  appropriated,  it  is  enough  to  say  that  this  is  not 
such  an  agreement  as  equity  will  sustain.  There  was  not  only 
such  a  gross  inadequacy  of  price  as  to  shock  the  moral  sense,  but 
there  was  in  effect,  a  sale  by  a  trustee  to  himself,  or  to  his  own 
use  and  benefit.  This  equity  will  never  permit,  not  even  where 
there  is  good  faith  and  an  adequate  consideration.  Here  there 
was  neither.  The  vender  and  purchaser  were  in  the  same  inter- 
est. As  directors  of  the  canal  company,  it  was  the  duty  of  Mr. 
Lord  and  his  associates  to  obtain  the  highest  price  for  the  prop- 
erty ;  while  as  stockholders  of  the  railroad  company,  it  was  their 
interest  to  get  it  as  low  as  possible.  It  was,  in  effect,  a  sale  by 
the  railroad  company  to  itself.  There  was  no  adverse  interest 
or  adversary  parties,  and  the  sale  was  a  mere  form.  Nothing  is 
better  settled  in  equity  than  that  such  a  transaction  on  the  part 
of  a  trustee  does  not  bind  the  ccstui  que  trust.  It  is  equally 
well  settled  that  the  property  of  a  corporation  is  a  trust  fund  in 


IN  THE  SUPREME  COURT  OF  OHIO.  135 

the  hands  of  its  directors  for  the  benefit  of  its  creditors  and  stock- 
holders. 2  Story's  Eq.  1 252 ;  Aberdeen  Eailivay  Company  v.  Blai- 
kie,  1  M'Queen,  461  ;  Wood  v.  Dummer,  3  Mason,  309.  If  it  was 
desired  or  intended  to  make  such  a  purchase  of  the  property  as 
would  bind  the  stockholders  and  creditors  of  the  canal  company, 
all  of  them  should  have  either  been  consulted  or  bought  out. 
That  would  have  been  the  fair  way  to  accomplish  the  object.  To 
undertake  by  getting  control  of  the  company,  and  then  under 
pretense  of  acting  as  agents  and  trustees  for  all  the  stockholders 
and  creditors,  deliberately  to  trample  under  foot  the  rights  of  the 
minority,  is  rather  a  sharp  practice,  and  one  which  a  court  of 
equity  will  never  tolerate.  A  director  whose  personal  interests 
are  adverse  to  those  of  the  corporation  has  no  right  to  be  or  act 
as  a  director.  As  soon  as  he  finds  that  he  has  personal  interests 
which  are  in  conflict  with  those  of  the  company,  he  ought  to 
resign.  No  matter  if  a  majority  of  the  stockholders,  as  well  as 
himself,  have  personal  interests  in  conflict  with  those  of  the  com- 
pany. He  does  not  represent  them  aspersons,  or  represent  their 
personal  interests.  He  represents  them  as  stockholders,  and  their 
interests  as  such.  He  is  trustee  for  the  company,  and  whenever 
he  acts  against  its  interests — no  matter  how  much  he  thereby 
benefits  foreign  interests  of  the  individual  stockholders,  or  how 
many  of  the  individual  stockholders  act  with  him — he  is  guilty 
of  a  breach  of  trust,  and  a  court  of  equity  will  set  his  acts  aside 
at  the  instance  of  stockholders  or  creditors  who  are  damni- 
fied thereby.  Any  act  of  the  directory  by  which  they  intention- 
ally diminish  the  value  of  the  stock  or  property  of  the  company 
is  a  breach  of  trust,  for  which  any  of  the  stockholders  or  credit- 
ors may  justly  complain,  although  all  the  other  stockholders  and 
creditors  are  benefited,  in  some  other  way,  more  than  they  are 
injured  as  such.  While,  therefore,  we  are  of  opinion  that  the 
court  below  was  right  in  refusing  the  plaintiffs  an  injunction,  in 
refusing  to  set  the  sale  or  appropriation  aside,  and  in  refusing  to 
place  the  property  in  the  hands  of  a  receiver,  we  think  the  court 
erred  in  rejecting  testimony  as  to  the  general  value  of  the  prop- 
erty, and  in  not  finding  and  holding  that  the  Cincinnati  and  Indi- 
ana Railroad  Company  was  liable  to  account  to  the  Canal  Com- 
pany for  the  full  value  of  the  property  taken,  less  the  said  sum 


— 136-  It  BAKER  v.  WHITING ; 


of  $55,000  already  paid,  and  in  refusing  to  grant  a  new  trial  on 
that  ground. 

Judgment  reversed,  and  cause  remanded  for  a  new  trial  and 
further  proceedings. 

DAY,  C.  J.,  BitiNKERHOFFj  SCOTT,  and  WHITE,  J.  J.  con- 
curred. 


GEORGE  BAKER  AND  WIFE  v.  WHITING,  AND  OTHERS. 

[This  case  was  decided  at  the  May  Term,  1839,  °f  ^e  Circuit  Court  of 
the  United  States  for  the  State  of  Maine,  JOSEPH  STORY,  Associate  Justice 
of  the  Supreme  Court,  and  ARTHUR  WARE,  District  Judge,  Justice  STORY 
delivering  the  opinion.  Reported  in  3  Sumner's  Circuit  Court  Reports,  475.] 

A  deed  of  release  for  a  valuable  consideration,  and  intended  to  x;onvey  all  the 
party's  right  and  title,  if  it  can  not  take  effect  as  a  release,  may  be  construed, 
in  furtherance  of  the  intention  of  the  parties,  as  a  bargain  and  sale,  or  other 
appropriate  conveyance,  ulres  mayis  valeat  quam  percal. 

The  old  cases  with  regard  to  maintenance  and  champerty  go  farther  than  would 
now  be  sustained  in  courts  of  equity.  A  cestui  que  trust  may  lawfully  dispose 
of  his  trust  estate,  notwithstanding  his  title  is  contested  by  the  trustee. 
Neither  the  common  law,  with  "regard  to  maintenance  and  champerty,  nor  the 
statute  of  3'2  Henry  VIII,  ch.  9,  made  in  aid  thereof,  apply  to  a  trust  estate 
actually  existing,  either  by  the  acts  of  the  parties,  or  by  construction  of  law. 

There  can  be  no  disseisin  of  a  trust,  though  the  exercise  of  an  adverse  possession 
for  a  great  length  of  time  may  in  equity  bar  or  extinguish  iL 

A  purchase  by  an  agent  will  be  deemed,  by  a  court  of  equity,  a  purchase  for  his 
principals,  unless  the  agent  has  openly  and  notoriously,  and  with  full  notice 
to  his  principals,  discharged  himself  from  his  agency. 

A  tenant  in  common  can  not,  without  the  consent  of  his  co-tenants,  grant  permits  to 
persons  to  go  on  the  premises  owned  in  common,  and  to  cut  down  timber 
thereon  for  their  own  use,  for  a  compensation,  called,  in  the  language  of  the 
country,  "stumpage." 

All  acts  done  by  one  tenant  in  common,  are  to  be  done  for  the  interest  of  all  the 
co-tenants,  and  in  conformity  to  their  rights,  until  an  adverse  claim  is  noto- 
riously set  up  and  established  by  competent  proofs. 

Stimpson  gave  a  deed  of  release  of  his  interest,  as  a  tenant  in  common,  in  cer- 
tain premises,  to  Baker.  At  the  time  of  this  conveyance,  Whiting  wns  in 
possession  and  seised  of  the  premises,  claiming  them  in  his  own  right,  by 
virtue  of  a  purchase  under  a  tax  sale.  Whiting  was  one  of  the  tenants  in 
common  of  the  premises,  and  was  the  agent  of  Stimpson  and  the  other  pro- 
prietors. Held,  that  the  purchase  of  Whiting  must  be  deemed  a  trust  for 
the  benefit  of  Stimpson  and  his  grantee,  Baker,  to  the  extent  of  their  inter- 
ests;  that  he  ought  to  be  decreed  to  convey  the  legal  title  to  the  premises 


MAINE  CIRCUIT  COURT,  U.  STATES.  137 

after  being  satisfied  of  all  just  claims,  which  he  had  against  them  for  taxes 
for  the  purchase  money  laid  out  in  the  tax  sale,  for  his  expenditures  and 
improvements  upon  them,  and  also  for  his  reasonable  services  as  agent  in 
the  premises,  deducting  all  sums  of  money  received  by  him  in  the  premises 
for  "  stumpage,"  or  otherwise. 

In  equity,  length  of  time  is  no  bar  to  a  trust  clearly  established ;  provided  no 
circumstances  exist  to  raise  a  presumption  from  lapse  of  time  of  an  extin- 
guishment of  the  trust,  and  no  open  denial  or  repudiation  of  the  trust  is 
brought  home  to  the  knowledge  of  the  parties  in  interest,  which  requires  them 
to  act  as  upon  an  adverse  title. 

BILL  in  equity  and  cross-bill.  The  bill  stated,  that  on  or 
about  the  10th  of  November,  1806,  John  Peck,  by  deed  of  bar- 
gain and  sale,  conveyed  to  Jacob  Tidd,  father  of  Emily,  the  wife 
of  George  Baker,  and  to  Samuel  Stimpson  seven  thousand  and 
twenty  acres  of  land  situate  in  township  No.  12,  now  Whiting, 
in  the  county  of  Washington,  whereby  the  said  Tidd  and  Stimp- 
son became  seised  of  an  absolute  estate  in  the  said  seven  thou- 
sand and  twenty-three  acres  of  land  in  fee  simple,  as  tenants  in 
common  thereof,  and  in  common  with  other  owners  of  the  said 
township.  Afterward,  Tidd  and  Stimpson  employed  the  defend- 
ant Whiting  as  their  agent,  to  take  care  of  the  said  land  and  pre- 
vent any  trespass  thereon,  and  to  pay  all  taxes  lawfully  assessed 
on  the  same,  or  give  notice  thereof  to  his  constituents,  which  the 
said  Whiting  undertook  to  do.  Jacob  Tidd  died  in  the  year 
1821,  and  thereupon  one-seventh  of  his  interest  descended  to  his 
daughter  Emily,  who  became  seised  thereof.  Another  undivided 
seventh  part  descended  to  her  brother  William  Dawes  Tidd,  son 
of  the  said  Jacpb,  who  became  seised  thereof,  and  afterward 
died,  so  seised,  unmarried  and  without  issue,  whereby  one-sixth 
part  of  the  said  undivided  share  of  the  said  W.  D.  Tidd,  de- 
scended and  came  to  the  said  Emily.  Samuel  Stimpson  after- 
ward conveyed  all  his  interest  to  George  Baker. 

The  bill  charged  a  combination  between  Charles  Peavy,  Timo- 
thy Whiting,  Jr.,  M.  J.  Talbot  and  Samuel  A.  Morse,  and  others, 
persons  unknown,  and  that  they  entered  into  the  said  tract  and 
disseised  the  complainants,  under  pretense  that  the  said  lands  were 
legally  assessed  for  public  taxes  and  duly  advertised  and  sold  to 
the  said  Whiting,  Sr.,  as  the  highest  bidder,  and  that  the  said 
owners  neglected  to  redeem  the  same  according  to  the  laws  of 
Maine,  whereby  the  said  Whiting,  Sr..  lawfully  became  the 


138  BAKER  v.  WHITING; 


absolute  owner  thereof  in  fee  simple  ;  whereas  the  contrary  is 
true,  and  that  no  such  tax  was  lawfully  assessed,  nor  was  any 
sale  thereof  lawfully  made. 

That  Whiting  fraudulently  kept  the  complainants  and  the  said 
Tidd  and  Stimpson,  wholly  ignorant  and  uninformed  of  the  said 
pretended  assessment  and  sale,  that  he  might  seem  to  acquire 
some  legal  title  to  the  said  seven  thousand  and  twenty-three  acres, 
through  their  neglect  to  redeem  the  same. 

That  the  said  Whiting,  Sr.,  after  his  pretended  purchase, 
sold  the  said  lands,  absolutely  but  not  in  good  faith,  and  for  a  valua- 
ble consideration,  to  the  said  Morse,  Talbot,  and  Whiting,  Jr. ; 
or  some  of  them.  The  said  grantees  petitioned  for  partition  as 
tenants  in  common  with  persons  unknown,  and  that,  on  notice 
given  and  proved,  and  proceedings  had,  partition  was  made  by 
commissioners  appointed  for  that  purpose,  and  lands  were  set  off 
in  severalty  to  Morse,  Talbot,  and  Whiting,  Jr. 

The  bill  alleged  further,  that  Whiting,  Sr.,  under  some  pre- 
tense of  right,  had  cut  down,  converted  to  his  own  use,  and  re- 
ceived pay  for  large  quantities  of  timber,  without  the  license  or 
consent  of  the  complainants,  or  persons  under  whom  they  claim, 
and  that  during  the  past  Winter,  and  up  to  the  time  of  the  filing 
of  the  bill,  the  said  Peavy  and  others  had  entered  upon  the  said 
lands  and  cut  down  a  large  number  of  timber-trees  thereon, 
which  they  were  about  to  remove  and  convert  into  lumber,  to  the 
great  and  irreparable  injury  of  the  complainants. 

The  bill  concluded  with  a  prayer,  that  the  defendants  might 
discover  and  exhibit  any  and  all  letters,  agreements,  memoran- 
dums, original  deeds,  and  paper  writings  in  their  possession  or  con- 
trol relating  to  the  matter  stated  arid  charged ;  that  they  might 
account  for  the  value  of  the  timber  and  trees,  which  were  upon 
the  said  lands,  and  cut  down  by  them  or  by  Whiting,  Sr. ;  that 
they  might  be  restrained  from  cutting  and  removing  the  said 
timber,  and  that  they  might  be  required  to  release  their  pretended 
titles  to  the  premises,  and  for  further  and  other  relief. 

The  answer  of  Timothy  Whiting  admitted  the  title  to  have 
been  originally  in  Emily  Baker,  as  stated,  but  alleged,  that  it 
was  defeated  by  a  tax  sale,  on  the  7th  of  August,  1821,  and  fur- 
ther denied  all  agency  for  the  complainants,  or  for  Tidd  or  Stimp- 
son, or  that  he  ever  undertook  to  act  as  agent  for  them.  The 


MAINE  CIRCUIT  COURT,  U.  STATES.  139 

answer  stated,  that  the  defendant,  on  the  27th  of  August,  1821, 
purchased  seventeen  thousand  five  hundred  acres,  lying  in  com- 
mon with  the  residue  of  the  said  lands  in  the  said  plantation,  at 
an  auction  sale  of  the  same,  by  Enoch  Hill,  collector  of  taxes  for 
that  year,  the  same  having  been  sold  for  the  non-payment  of 
certain  taxes  assessed  on  the  said  lands,  being  the  unimproved 
lands  of  non-resident  proprietors  thereof  for  the  year  1821,  the 
said  taxes  amounting  to  $357.85.  The  sale  was  advertised,  previ- 
ously in  the  Eastern  Argus,  printed  at  Portland,  and  in  the  East- 
port  Sentinel,  and  notice  thereof  posted  in  the  said  plantation. 

The  said  collector  executed  and  delivered  a  deed  of  the 
said  land  to  the  defendant  on  the  6th  of  November,  1821,  to 
hold  in  fee  simple,  but  subject  to  the  legal  right  of  redemption ; 
but  which  was  never  redeemed,  and  so  the  defendant  became 
the  absolute  owner  thereof  in  fee. 

Whiting  further  alleged,  that  he  owned  several  thousand 
acres  in  the  town  of  Whiting,  prior  to  August  27,  1821,  but 
had  no  means  of  knowing  the  exact  quantity,  and  that,  there- 
fore, it  became  necessary  for  him  to  convey  to  Whiting,  Jr., 
Morse,  and  Talbot,  in  order  to  have  his  interest  properly  ascer- 
tained, and  set  off  in  severalty ;  that  many  years  prior  to  the 
filing  of  the  bill,  Whiting,  Jr.,  Morse,  and  Talbot,  had  conveyed 
their  said  several  parcels  to  the  defendant,  whereby  the  legal 
title  became  vested  in  him,  and  during  the  past  Winter,  and  to 
the  time  of  the  filing  the  bill,  he  entered  upon  lands  owned  by  him 
in  severalty,  and  no  other,  and  cut  down  a  large  number  of 
timber-trees  as  charged  in  the  said  bill,  as  he  had  a  right  to  do. 

Whiting  further  alleged,  that  the  deed  mentioned  in  the  bill, 
which  was  given  by  the  said  Samuel  Stimpson  to  the  said  George 
Baker,  was  given  in  December,  1835,  or  January  or  February, 
1836,  at  which  time  the  land  mentioned  in  the  said  deed  was  in 
the  possession  of  the  defendant  or  his  assigns,  the  evidence  of 
whose  titles  was  all  on  record,  and  the  said  lands  were  then 
claimed  to  be  the  defendant's  or  his  assign's, — all  which  facts 
were  well  known  to  said  Baker  at  the  time  he  made  his  said 
purchase  of  the  said  Stimpson. 

Answers  were  also  put  in  by  Samuel  A.  Morse,  M.  J.  Talbot, 
and  Charles  Peavy,  wherein  they  stated  the  origin  of  their  in- 
terests in  the  estates  mentioned  in  the  original  bill.  A  cross- 


140  BAKER   v.  WHITING; 


bill  Avas  also  filed  by  Timothy  Whiting,  Samuel  A.  Morse,  and 
M.  J.  Talbot,  charging  a  combination  to  purchase  up  stale  or 
pretended  titles,  and  praying  for  a  dismissal  of  the  original  bill, 
a  perpetual  injunction  in  relation  to  the  premises,  and  for  fur- 
ther relief.  The  answer  to  the  cross-bill  denied  all  combination 
to  purchase  up  stale  or  pretended  titles,  and  concluded  with  a 
prayer  for  an  injunction  against  Whiting,  to  restrain  him  from 
cutting  and  carrying  away  timber  from  the  premises,  or  permit- 
ting timber  to  be  cut  and  carried  away. 

Hobbs,  Fessenden,  and  Deblois,  for  the  plaintiffs.  Daveis  and 
Mellen,  for  the  defendants. 

STORY,  J.  Several  objections  were  made  to  the  present  bill 
at  the  hearing,  some  of  which  involve  matters  of  fact,  and  others 
matters  of  law.  I  will  briefly  state  the  opinion  of  the  Court  upon 
all  the  points  suggested  at  the  argument. 

The  first  question  is,  whether  the  plaintiffs  have  shown  any 
title  whatsoever  to  maintain  the  present  bill ;  or,  in  other  words, 
whether  they  have  shown  any  interest  or  estate  in  the  land 
in  controversy.  The  bill  states,  that  Baker  and  his  wife  are 
entitled  in  her  right  to  one-sixth  of  one  undivided  seventh  part 
of  the  premises ;  and  that  Baker  in  his  own  right  is  entitled  to 
one  moiety  of  the  premises  in  virtue  of  his  purchase  and  assign- 
ment from  Stimpson,  who  was  owner  thereof.  Mrs.  Baker  in- 
herited from  her  father,  Jacob  Tidd,  one-seventh  of  the  premises ; 
and  by  the  death  of  her  brother,  William  Dawes  Tidd,  one- 
seventh  of  one-seventh ;  he  dying  after  he  came  of  age,  and  his 
mother  being  entitled  to  share  with  his  brothers  and  sisters.  By 
the  deed  of  Baker  and  his  wife  to  Howe,  in  December,  1835, 
they  released  their  right  and  title  to  four-sixth  parts  of  the 
premises ;  and  the  answer  to  the  cross-bill  insists  that  she  never 
intended  by  that  deed  to  part  with  the  share  derived  from  her 
brother.  Be  this  as  it  may,  it  was  very  clear  that  she  has  not 
conveyed  it  by  this  deed,  since  her  right  is  still  retained  to  the 
remaining  two-sixths  of  the  premises.  So  that  Baker  and  his 
wife  are  fully  entitled  to  the  whole  share  derived  from  her 
brother.  The  bill  is,  therefore,  maintainable  by  the  plaintiffs 
in  her  right,  so  far  as  this  interest  goes. 


MAINE  CIRCUIT  COURT,  U.  STATES. 


As  to  the  title  derived  by  Baker  by  the  deed  of  release  from 
Stimpson  of  one  moiety  of  the  premises,  as  the  release  was  for  a 
valuable  consideration,  and  meant  to  convey  all  Stimpson's  right 
and  title,  if  it  can  not  take  effect  as  a  release,  it  may  be  con- 
strued, in  furtherance  of  the  intention  of  the  parties,  as  a  bar- 
gain and  sale,  or  other  appropriate  conveyance,  id  >res  magis 
valeatj  quam  pereat.  This  doctrine  I  take  to  be  now  well  set- 
tled at  law.  But  in  equity,  thei'e  can  be  no  question  that  it  is 
fully  established.  The  case  of  Doungsworth  v.  Blair,  1  Keen, 
801,  is  directly  in  point,  if,  indeed,  so  plain  a  principle  required 
any  authority  to  support  it.  In  that  case  it  was  held  that  an 
indenture  which  was  intended  to  be  an  indenture  of  release,  but 
could  not  operate  as  such,  might,  for  the  purpose  of  carrying 
into  effect  the  real  intention  of  the  parties,  if  there  was  a  proper- 
consideration,  be  construed  as  a  covenant  to  stand  seised.  The 
case  of  a  valuable  consideration  is  far  stronger  (a). 

The  main  objection,  however,  taken  to  the  operation  of  this 
deed,  is  that,  at  the  time  of  this  conveyance  by  Stimpson  to 
Baker,  the  defendant  was  in  full  possession  and  seisin  of  the 
premises,  claiming  them  in  his  own  right,  and  of  course,  that 
Stimpson  was  then  disseised,  and  the  conveyance  to  Baker  was 
void  under  the  operation  of  the  common  law  relative  to  main- 
tenance and  champerty,  and  the  statute  of  32  Henry  VIII,  eh. 
9,  made  in  aid  thereof.  This  statute  prohibits,  under  penalties, 
the  buying  or  selling  of  any  pretended  right  or  title  to  land 
unless  the  vendor  is  in  actual  possession  of  the  land,  or  of  the 
reversion  or  remainder.  The  object  of  the  statute,  as  well  as  of 
the  common  law,  was  doubtless  to  prevent  the  buying  of  contro- 
verted legal  titles,  which  the  owner  did  not  think  it  worth  his  while 
to  pursue,  on  mere  speculation  ;  so  that  in  fact  it  might  properly  be 
deemed  the  mere  purchase  of  a  law-suit  (&).  The  old  cases  upon 
this  subject  have  gone  a  great  way,  further  indeed  than  would 
now  be  sustained  in  courts  of  equity,  which  have  broken  in  upon 
some  of  the  doctrines  established  thereby.  But  be  this  as  it 


(a)  See,  also,  1  Story's  Eq.  Jurisp.  sec.  168. 

(6)  4  Black  Com.  135,  136;  Hawk.  Pleas  of  the  Crown,  B.  1,  cli.  83,  sec.  1-20; 
Id.  B.  1,  ch.  84,  sec.  1-20;  Id.  B.  1,  ch.  86,  sec.  1,  sec.  4-17. 

See  also,  hereinafter,  Boyd  v.  Blankman,  29  California,  19.  In  this  case  the 
cestui  que  trust  had  sold  her  interest,  and  the  same  defense  was  set  up. 


* 
142  BAKER  v.  WHITING; 

may,  neither  the  common  law  nor  the  statute  applies  to  a  trust 
estate  actually  existing,  either  by  the  acts  of  the  parties,  or  by 
construction  of  law.  Thus  a  cestui  quc  trust  may  lawfully  dis- 
pose of  his  trust  estate,  notwithstanding  his  title  is  contested  by 
the  trustee ;  for  the  latter  can  never  disseise  the  former  of  the 
trust  estate,  but  so  long  as  it  continues  in  the  possession  of  the 
trustee  it  is  treated,  at  least  in  a  court  of  equity,  as  the  possession 
of  the  cestui  que  trust.  There  can  be  no  disseisin  of  a  trust ; 
although  the  exercise  of  an  adverse  possession  for  a  great  length 
of  time  may,  in  equity,  bar  or  extinguish  the  trust.  The  whole 
question  in  the  present  case  turns  upon  this,  whether  the  de- 
fendant Whiting,  at  the  time  of  his  purchase  of  the  premises  «at 
the  sale  for  taxes,  in  August,  1821,  was  the  agent  of  the  heirs 
of  Jacob  Tidd,  of  Stimpson,  and  of  other  proprietors,  of  their 
undivided  shares  in  the  premises.  If  he  was,  then,  upon  the 
acknowledged  principles  of  courts  of  equity,  he",  as  an  agent, 
could  not  become  a  purchaser  at  the  sale  for  himself,  but  his 
purchas^  must  be  deemed  a  purchase  for  his  principals.  It 
matters  not  whether,  in  such  a  case,  the  defendant  intended  to 
purchase  for  himself,  and  on  his  own  account,  or  not.  For 
courts  of  equity  will  not  tolerate  any  agent  in  acts  of  this  sort, 
since  they  operate  as  a  virtual  fraud  upon  the  rights  and  inter- 
ests of  his  principals,  which  he  is  bound  to  protect.  He  was 
bound,  as  their  agent  for  the  premises,  to  give  them  notice  of 
the  intended  sale,  and  to  save  the  property  from  any  sacrifice ; 
and  until  he  had  openly  and  notoriously,  and  after  full  notice  to 
the  principals,  discharged  himself  from  his  agency,  he  could  not 
be  permitted,  in  a  court  of  equity,  to  become  a  purchaser  at  the 
sale.  If,  indeed,  as  there  is  much  reason  to  believe,  at  the  time 
of  the  sale,  he  had  funds  of  his  principals  in  his  own  hands, 
sufficient  to  meet  the  taxes — for  a  fortiori,  if  he  endeavored  to 
dissuade  or  to  prevent  other  persons  from  becoming  bidders  at 
the  sale,  as  some  of  the  evidence  states — his  conduct  was,  sup- 
posing him  to  be  agent,  still  more  reprehensible.  The  validity 
of  the  conveyance,  then,  from  Stimpson  to  Baker,  depends  upon 
the  fact,  whether  the  defendant  Whiting  was,  or  was  not,  the 
agent  and  mere  trustee  of  the  parties ;  and  whether,  if  agent, 
eo  instanti,  that  the  conveyance  under  the  tax  sale  was  made 
to  him,  the  law  did  not  attach  the  trust  to  the  lands  in  his 


MAINE  CIRCUIT  COURT  U.  STATES.  H3 

hands.  If  it  did,  then  the  conveyance  of  Stirapson  to  Baker 
was  valid.  If  it  did  not,  then  it  was  void,  as  falling  within 
the  reach  of  the  doctrines  respecting  maintenance,  champerty, 
and  pretended  titles.  Those  doctrines  do  not  apply  to  trusts 
created  in  privity  of  estate,  but  to  adverse  and  independent 
titles  between  strangers.  It  is  quite  a  mistake  to  suppose  that 
a  controverted  trust  may  not  be  assigned  by  the  owner,  when  it 
is  clearly  and  unequivocally  attached  to  property.  If  a  contract 
is  made  for  the  sale  of  lands,  the  contractor  may  sell  and  assign 
the  whole,  or  a  part,  or  make  a  binding  sub-contract  respecting 
the  same,  whether  there  be  a  controversy  respecting  the  specific 
performance  of  the  original  contract,  or  not.  The  case  of  Wood 
v.  Griffith,  I  Swan  St.  55,  56,  is  fully  in  point  upon  this  doc- 
trine, even  when  the  assignment  or  sale  is  made  during  the 
pendency  of  a  suit  for  a  specific  performance  (a).  I  repeat  it, 
therefore,  that  the  whole  question,  whether  the  deed  from  Stimp- 
son  to  Baker  was  a  valid  conveyance  or  not,  depends  upon  the 
point,  whether,  at  the  time,  the  defendant  was  actually  or  con- 
structively a  trustee  of  the  premises  for  Stimpson. 

And,  in  my  judgment,  notwithstanding  then  the  stern  denials 
of  the  answer  of  Whiting,  the  fact  of  the  agency  of  the  defend- 
ant, at  and  before  the  time  of  the  tax  sale,  for  Stimpson,  as  well 
as  for  the  heirs  of  Jacob  Tidd,  and  other  proprietors,  is  com- 
pletely established  by  evidence  altogether  unexceptionable  and 
conclusive.  It  is  proved  by  acts  done,  which  in  no  other  way 
could  be  lawful,  or  indeed  could  be  fairly  accounted  for.  And  it 
is  also  proved  by  written  documents  and  receipts,  which  admit 
of  no  reasonable  doubt  (b).  It  appears,  that  as  long  ago  as  1815, 

(a)  See,  also,  2  Story  on  Eq.  Juris,  sees.  1048-1054;    Harrington  v.  Ford,  2 
Mylne  and  Keene,  590;  Ifarkley  v.  Russell,  2  Sim.  and  Stuart,  244.     In  the  case 
of  Prosser  v.  Edmonds,  1  Younge  and  Call.  497,498.  there  was  no  trust, but  a  mere 
naked  right  to  set  aside  a  conveyance  for  fraud,  which  distinguishes  it  from  the 
present  cnse. 

(b)  Morris  v.  Joseph,  1  West  Va.  256,  is  the  case  of  a   trustee  de  son  tort— 
manager  of  another's  property,  in  the  absence  of  the  other.     He  allows  the  land 
to  be  sold  for  taxes  by  the  sheriff.     He  becomes  the  purchaser.     In  an  action  of 
ejectment  brought  by  him  against  the  former  owner,  the  defendant  suffers  judg- 
ment by  default,  "  reserving  equity."     On  his  bill  to  set  up  the  equity  so  reserved, 
the  court  enjoined  the  trustee  from  executing  his  writ  of  possession  at  law.     The 
judge  says:  "We  are  of  opinion  that  the  appellant  was  the  trustee  and  agent  of 
Lefever." 


144  BARKER  v.  WHITING; 

the  defendant  Whiting  became  a  purchaser,  and,  as  such,  a  ten- 
ant in  common  with  the  other  proprietors  of  these  undivided 
lands.  He  undertook,  at  various  times,  between  1815  and  the 
sale  in  1821,  as  well  as  afterward,  to  grant  written  permits  to 
different  persons  to  go  on  the  premises  and  to  cut  down  timber 
thereon  for  their  own  use,  for  a  compensation  called,  in  the  ex- 
pressive language  of  the  country,  ll  stumpage,"  and  for  this  com- 
pensation, he  also,  at  several  times,  gave  receipts.  Now,  as  a 
tenant  in  common,  he  had  no  authority  whatsoever,  without  the 
consent  express  or  implied  of  his  co-tenants,  to  grant  any  such 
permits,  or  to  authorize  any  such  acts.  They  are  expressly  pro- 
hibited, not  only  by  the  common  law,  but  by  the  positive  pen- 
alties of  the  statute  of  the  State  upon  this  subject.  Those 
penalities  are  severe,  and  the  law  will  never  presume  that  a 
party  does  an  unlawful  act  unless  it  is  shown  by  some  competent 
evidence.  The  presumption,  in  the  absence  of  counteracting 
evidence,  is,  that  it  is  done  under  lawful  authority,  if  it. might 
have  been  so  done.  A  court  of  equity  would,  a  fortiori,  indulge 
in  such  a  presumption  in  favor  of  a  party,  who  is  a  tenant  in 
common,  that  he  acted  as  a  common  agent,  for  the  common 
benefit  of  all  the  proprietors ;  since,  in  that  way,  he  may  promote 
the  true  interests  of  all.  Indeed,  all  acts,  done  by  one  tenant  in 
common,  are  presumed  to  be  done  for  the  interest  of  all  the  co- 
tenants,  and  in  conformity  to  their  rights,  until  an  adverse  claim 
is  notoriously  set  up,  and  established  by  competent  proofs.  In 
the  present  case,  upon  this  sole  ground,  in  the  absence  of  all 
counter  proofs,  the  acts  of  the  defendant  Whiting  up  to  the  tax 
sale  in  1821,  ought  to  be  deemed  to  be  done  by  him  as  a  tenant 
in  common,  acting  for  the  benefit  of  all,  and  therefore  acquiesced 
in  by  all. 

But  the  case  does  not  rest  upon  this  sole  ground,  either  of  fact 
or  presumption.  The  very  permits  and  receipts  afford  satisfac- 
tory evidence,  that  the  defendant  Whiting  did  not  act  solely  for 
himself;  but  that  he  acted  for  other  proprietors.  It  is  true  that, 
in  one  case  only,  does  he  give  a  receipt  in  terms  for  the  proprie- 
tors of  the  undivided  lands  for  stumpage.  But  in  all  the  other 
cases,  and  they  are  numerous,  his  receipts  always  purport  to  be% 
"for  the  undivided  lands,"  and  never,  in  an  instance,  purport  to 
be  on  his  own  individual  account.  This  is  very  strong  evidence 


MAINE  CIRCUIT  COURT,  U.  STATES.  145 

to  establish  the  real  nature  of  the  transactions.  If  he  was  actin°- 
for  himself  alone,  his  silence  on  this  point  is  wholly  unaccounta- 
ble ;  if  he  was  acting  for  himself  and  other  proprietors,  then  the 
language  is  clear  and  intelligible,  and  has  its  appropriate  effect. 
In  this  way  too,  the  acquiescence  of  his  co-tenants  can  be  easily  ex- 
'plained.  In  any  other  view  it  would  be  utterly  unaccountable. 
I  have,  therefore,  no  doubt  whatever  on  this  point,  that  the  defend- 
ant Whiting  was  agent  for  Jacob  Tidd  during  his  life  (and  he  died 
in  March,  1821,)  and  afterward  for  his  heirs  (some  of  whom  were, 
as  it  is  said,  at  that  time  infants),  as  well  as  for  Stimpson  and  other 
proprietors.  If  so,  the  purchase  by  him  at  the  tax  sale  became 
immediately,  by  operation  of  the  principles  of  a  court  of  equity,  a 
trust  for  the  benefit  of  the  principals. 

Then,  it  is  said,  that  plaintiffs  are  barred  from  any  right  in 
equity  by  the  mere  lapse  of  time.  It  does  not  appear  what  were 
the  respective  ages  of  the  heirs  of  Tidd  at  the  time  of  the  tax 
sale,  nor  what  was  the  age  of  Stimpson  ;  and  all  of  them  were  at 
the  time  (as  it  should  seem)  citizens  of  another  State,  and  of 
course  come  within  the  common  exceptions  of  statutes  of  limi- 
tations. But  what  is  more  particularly  applicable  to  the  present 
case,  twenty  years  had  not  elapsed  before  the  filing  of  the  bill ; 
and,  I  apprehend,  that  in  the  case  of  a  trust  of  lands,  nothing 
short  of  the  statute  period,  which  would  bar  a  legal  estate  or 
right  of  entry,  would  be  permitted  to  operate  in  equity,  as  a  bar 
of  the  equitable  estate.  This  doctrine  seems  to  be  admitted  by 
the  authorities  ever  since  the  great  case  of  Clmlmondeley  v.  Clin- 
ton, 2  Jac.  &  Walker,  1,  and  it  has  been  repeatedly  acted  upon 
in  the  Supreme  Court  of  the  United  States  (a).  Indeed,  in  the 

(a)  See  the  cases  cited  in  2  Story  Eq.  Jurisp.,  sec.  1520-1522;  and  Story's 
Eq.  Plead.,  sec.  503,  751-759  ;  and  Elmendorj  v.  Taylor,  10  Wheat  168 ;  Howell's 
Heirs  v.  AT  Crary,  7  Dana,  388.  On  p.  391,  it  is  said  by  the  Court  of  Appeals :  "  As 
this  suit  is  brought,  not  for  damages  for  fraud,  but  for  a  cancelment  of  the  deed 
and  a  restitution  of  the  land,  it  is  virtually  a  proceeding  in  rem;  and  a  prayer 
for  a  cancelment  of  the  sheriff's  deed  is  only  subsidiary  to  the  chief  end  of  obtain- 
ing the  land  itself.  Such  a  suit  in  equity  should  not  be  barred  by  adopting  the 
legal  limitatation  to  an  action  for  fraud,  which  confirms  the  contract.  The  only 
suitable  analogy  is  an  action  for  the  land  founded  on  a  right  of  entry,  which 
would  not,  as  we  think,  be  barred  by  a  shorter  limitation  than  that  of  twenty 
years,  even  though  the  defending  party  should  rely  on  a  fraudulent  deed  more 
than  five  years  old.  As  long  as  the  action  itself  is  not  barred  by  time,  the  right 
to  prove  any  fact  material  to  the  maintenance  of  it,  should  not,  in  our  opinion,  be 

10 


146  BARKER  v.  WHITING. 

case  of  Prevost  v.  Gratz,  6  Wheat.  484,  it  was  broadly  laid 
down,  that,  in  equity,  length  of  time  is  no  bar  to  a  trust  clearly 
established,  and  that,  in  cases  where  fraud  is  imputed  and 
proved,  length  of  time  ought  not,  upon  principles  of  eternal  just- 
ice, to  be  admitted  to  repel  relief.  This  doctrine  is  regularly 
true,  when  it  is  received  with  the  proper  accompanying  limita- 
tions, that  no  circumstances  exist  to  raise  a  presumption  from 
lapse  of  time  of  an  extinguishment  of  the  trust,  and  no  open 
denial  or  repudiation  of  the  trust  is  brought  home  to  the  knowl- 
edge of  the  parties  in  interest,  which  requires  them  to  act,  as 
upon  an  asserted  adverse  title. 

Upon  the  whole,  I  am  of  opinion,  that  the  purchase  by  the 
defendant  must  be  deemed  to  be  a  trust  for  the  benefit  of  the 
plaintiffs  to  the  extent  of  their  interests ;  that  the  defendant 
ought  to  be  decreed  to  convey  the  legal  title  to  them,  after  be- 
ing satisfied  of  all  just  claims,  which  he  has  agamst  the  lands 
for  taxes,  for  purchase-money  paid  at  the  tax  sale,  for  his  ex- 
penditures and  improvements  upon  the  land,  and  also  for  reason- 
able services  as  agent  in  the  premises,  deducting  all  sums  of 

barred  by  any  statutory  or  prescriptive  limitation.  We  have  not  seen  a  case  in 
which  a  suit  in  chancery,  to  recover  land  and  set  aside  a  fraudulent  deed  in 
subservience  to  that  end,  was  ever  barred  by  the  lapse  of  five  years,  or  by  less 
than  what  would  bar  a  suit  for  the  land,  founded  on  any  other  equity ;  and  we 
can  perceive  no  reason  or  analogy  which  should  prescribe  any  other  limitation 
in  the  one  case  than  the  other.  In  each  the  object  is  the  same,  to  wit,  the  land, 
or  the  security  of  the  title  thereto;  and  therefore,  in  each  the  limitation  should 
be  the  same."  See  the  authorities  there  cited,  p.  392.  And  the  court  add,  in 
Blights  Heirs  v.  Tobin,  1  Mon.  612  :  "This  court  decided  that  the  statutory  limita- 
tion to  a  motion  to  quash  a  sheriff's  sale  for  fraud  should  not  be  adopted,  by  an- 
alogy, as  a  bar  to  a  bill  in  chancery  for  the  same  purpose;  and  the  same  reason 
would  apply  equally  to  the  limitation  prescribed  to  an  action  for  damages  for 
fraud." 

Findley  v.  Langford,  1  Marsh.  864.  By  the  Chief  Justice :  "  A  lapse  of  less 
than  twenty  years  from  the  accrual  of  the  right  of  suit  is  no  bar  to  the  assertion 
of  an  equitable  right  in  a  court  of  chancery,  as  it  would  not  be  to  the  assertion 
of  a  legal  right  in  a  court  of  law." 

Severn*  v.  Hill,  8  Bibb,  240.  Twenty  years'  possession  is  held,  in  chancery, 
by  analogy  to  the  law,  to  bar  a  recovery  of  real  estate. 

Patrick's  Heirs  v.  Chenault,  6  B.  Mon.  321,  was  a  suit  in  chancery,  and  it  waa 
held  that  the  plaintiffs  were  barred  in  twenty-three  years  after  the  death  of  their 
mother  (from  whom  it  was  claimed  they  derived  title),  eighteen  years  after  the 
death  of  the  father,  and  when  more  than  fifty  years  had  transpired  after  the 
alleged  mistake  in  the  deed  had  been  made,  and  which  was  then  sought  to  be 
reformed. 


BOYD  v.  BLANKMAN. 


money  received  by  him  in  the  premises  for  stumpage  or  other- 
wise. And  it  ought  to  be  referred  to  a  Master  to  take  an  ac- 
count in  the  premises,  and  make  a  report  thereof  to  the  Court, 
according  to  the  principles  of  this  decree. 

As  to  the  other  defendants,  Peavy,  Morse,  and  Talbot,  no 
case  has  been  made  out  against  them  of  any  fraud  or  miscon- 
duct, calling  for  the  interposition  of  the  Court.  The  bill  will, 
therefore,  be  dismissed  against  them,  with  costs.  But  the 
plaintiffs  are  entitled  to  costs,  upon  the  cross-bill,  against  the 
parties  thereto,  namely,  Whiting,  Morse,  and  Talbot,  and  may 
set  them  off  pro  tanto  against  the  costs  of  the  original  bill  de- 
creed to  Morse  and  Talbot. 

The  District  Court  concurs  in  this  opinion,  and  a  decretal 
order  will  be  drawn  up  accordingly. 


ALEXANDER  BOYD  v.  H.  G.  BLANKMAN. 

[This  case  was  decided  at  the  October  term,  1865,  of  the  Supreme  Court 
of  the  State  of  California,  AUGUSTUS  L.  RHODES,  Associate  Justice,  deliv- 
ering the  opinion.  Reported  in  29  California,  19.] 

If  the  administrator  of  an  estate  makes  a  sale  of  land  belonging  to  the  estate, 
under  an  order  of  the  Probate  Court  procured  by  him,  and  at  the  sale  be- 
comes the  purchaser  through  another  person,  who  takes  and  holds  the  legal 
title  in  trust  for  the  administrator,  and  afterward  conveys  it  to  him,  the 
heir  retains  such  an  equitable  interest  in  the  land  as  is  assignable,  and  the 
assignee  may  maintain  an  action  against  the  administrator  to  enforce  a 
trust. 

If  an  administrator  becomes  a  purchaser,  through  another  person,  of  land  of  the 
estate  sold  by  him  under  an  order  of  the  Probate  Court,  the  heir  retains  the 
equitable  title,  and  his  deed  conveys  such  equitable  title,  while  the  legal  title 
is  vested  in  the  administrator  who  holds  it  in  trust. 

In  such  case  the  deed  of  the  heir  conveys  the  equitable  title,  and  his  deed  is 
•  evidence  of  his  intention  to  disaffirm  the  sale. 

Where  an  administrator  at  his  own  sale  becomes  the  purchaser,  through  another 
person,  of  land  of  the  estate,  there  are  strong  reasons  for  holding  that  the 
relation  of  trustee  and  cestui  que  trust  is  not  by  the  fact  of  the  sale  shifted 
from  the  land  to  the  proceeds  of  the  sale,  but  that  the  administrator  remains 
a  trustee  as  to  the  land  until  the  heir  affirms  the  sale. 

If  an  administrator  at  his  own  sale,  made  under  an  order  of  the  Probate  Court, 
buys  the  land  of  the  estate  through  another  person,  the  sale  is  not  void,  but 


148  ,  BO  YD  v.  BLANKMAN, 

only  voidable  at  the  election  of  the  heirs  or  other  persons  interested  in  the 
estate,  who  may  have  the  sale  set  aside  and  the  administrator  declared  a 
trustee. 

If  the  Probate  Court,  in  a  matter  where  it  has  jurisdiction,  makes  an  order  upon 
insufficient  evidence,  or  contrary  to  the  evidence,  the  order  can  not  on  that 
ground  be  attacked  in  a  collateral  proceeding. 

If  an  administrator  procures  an  order  of  the  Probate  Court  for  the  sale  of  real 
estate  to  pay  a  debt  which  the  administrator  had  previously  paid  with  funds 
of  the  estate,  it  is  not  a  fraud  which  will  enable  the  order  to  be  attacked  in 
a  collateral  proceeding. 

An  order  of  a  Probate  Court  to  sell  all  the  real  estate  of  an  intestate  to  pay 
debts,  when  the  sale  -of  a  small  portion  would  have  been  sufficient,  can  not 
for  this  reason  be  set  aside  in  a  collateral  proceeding. 

The  fact  that  a  person  is  unlearned  and  ignorant  of  legal  proceedings,  affords 
no  ground  of  relief  in  equity,  unless  it  also  appears  that  he  relied  for  infor- 
mation upon  the  person  against  whom  relief  is  sought,  and  such  person  mis- 
represented the  state  of  facts. 

The  Statute  of  Limitations  is  applicable  alike  to  causes  of  action  in  equity  and 
at  law. 

When  the  cause  of  action  stated  in  the  complaint  is  for  relief  on  the  ground  of 
fraud,  and  is  stated  to  have  accrued  more  than  three  years  before  the  com- 
mencement of  the  action,  the  complaint  should  also  aver  that  the  acts  con- 
stituting the  fraud  had  been  discovered  within  three  years;  but  if  the  repli- 
cation contains  this  averment,  and  this  issue  is  tried  without  objection,  the 
irregularity  in  the  manner  of  presenting  the  issue  will  be  disregarded. 

A  defendant  relying  on  the  Statute  of  Limitations  should  not  allege  matter  of 
law,  but  the  facts  which  bring  him  within  the  statute. 

An  answer  stating  that  the  cause  of  action  has  not  accrued  within  five  years,  is 
sufficient  for  five  years;  and  for  any  period  of  limitation  named  in  the 
statute,  less  than  five  years. 

The  clause  in  the  seventeenth  section  of  the  Statute  of  Limitations,  providing 
that  an  action  for  relief  on  the  ground  ^f  fraud  shall  not  be  deemed  to  have 
accrued  until  the  discovery  of  the  facts  constituting  the  fraud,  is  applicable 
to  constructive  fraud  as  well  as  fraud  in  fact. 

An  action  for  relief  on  the  ground  of  fraud  may  be  commenced  at  any  time 
within  three  years  after  a  discovery  of  the  facts  constituting  the  fraud,  or 
of  facts  sufficient  to  put  a  person  of  ordinary  intelligence  and  prudence  on 
inquiry. 

APPEAL  from  the  District  Court,  Fourth  Judicial  District, 
city  and  county  of  San  Francisco. 

Jack  Hina  died  at  the  city  of  San  Francisco,  intestate,  on 
the  3d  day  of  October,  1850,  leaving  Mary  Hina,  his  widow, 
him  surviving,  his  sole  heir. 

The  said  Mary  Hina,  and  the  defendant  Henry  G.  Blankman, 
were  appointed  administrators  of  the  estate  of  said  Jack  Hina, 
deceased,  and  duly  qualified  as  such,  and  took  upon  themselves 
the  duties  of  such  administrators. 


IN  THE  SUPREME  COURT  OF  CALIFORNIA.  149 

The  property  and  assets  of  such  estate  were  the  lands  and 
premises  described  in  the  complaint,  being  fifty-vara  lot  number 
two  hundred  and  eighty-two  on  the  official  map  of  San  Fran- 
cisco, and  there  came  to  the  hands  of  the  defendant,  as  admin- 
istrator, the  sum  of  eight  hundred  and  ninety  dollars  in  cash, 
and  there  was  other  personal  estate  of  the  value  of  about  two 
hundred  dollars. 

Said  lands  and  premises  were  subject  to  an  incumbrance,  by 
way  of  mortgage,  in  the  sum  of  seven  hundred  dollars,  executed 
by  said  Jack  Hina  in  his  life-time,  bearing  interest  at  the  rate 
of  ten  per  cent  per  month,  on  which  interest  was  paid  by  Jack 
Hina  in  his  life-time,  to  the  24th  of  August,  1850. 

On  the  16th  day  of  December,  1850,  the  defendant,  as  ad- 
ministrator, presented  a  petition  to  the  Probate  Court  for  the 
sale  of  said  lands  and  premises  to  pay  said  mortgage  debt  and 
expenses  of  administration,  in  which  petition  the  said  Mary 
Hina,  co-administrator,  was  not  joined. 

The  only  debt  or  claim  against  the  said  estate,  excepting 
the  costs  and  expenses  of  administration,  was  the  said  mortgage 
debt. 

On  the  24th  day  of  December,  1850,  and  while  the  proceed- 
ings for  a  sale  were  pending  in  the  Probate  Court,  the  defend- 
ant Blankman  paid  the  amount  due  on  said  mortgage  to  the 
mortgagee,  and  procured  and  caused  the  said  mortgage  to  be 
assigned  to  one  Joseph  B.  Bidleman  for  his,  the  said  Blank- 
man's,  benefit. 

Said  Blankman  continued  to  prosecute  said  application  be- 
fore the  Probate  Court  for  a  sale  of  said  premises,  and  obtained 
an  order  for  such  sale,  and  on  the  15th  day  of  February,  1851, 
said  premises  were  put  up  for  sale  at  public  auction,  and  struck 
off  to  one  William  A.  A.  Reis,  as  the  purchaser,  at  the  price 
and  sum  of  fourteen  hundred  and  fifty  dollars,  and  a  conveyance 
was  made  by  said  Blankman,  as  administrator,  to  said  Reis,  but 
in  fact  for  the  benefit  of  the  defendant  Blankman,  and  no  money 
was  in  fact  paid  by  said  Reis  on  such  sale  and  purchase. 

On  the  10th  day  of  April,  1851,  the  said  Reis  conveyed  the 
said  lands  and  premises  to  said  Joseph  B.  Bidleman,  who  took 
said  conveyance,  and  held  said  lands  thereunder,  in  trust  and 
for  the  benefit  of  said  Blankman. 


150  BOYD   v.  BLANKMAN, 

On  the  19th  day  of  February,  1851,  the  said  Blankman 
caused  an  action  to  be  commenced,  in  the  name  of  the  said 
Joseph  B.  Bidleman,  as  plaintiff,  in  the  District  Court  of  the 
Fourth  Judicial  District,  wherein  said  Blankman,  as  adminis- 
trator, and  said  Reis,  were  made  defendants,  and  were  the  only 
defendants,  for  the  purpose  of  .foreclosing  said  mortgage  and 
selling  said  premises.  A  judgment  and  decree  was  rendered  in 
said  action,  by  and  with  the  written  consent  of  the  defendants 
therein,  for  the  foreclosure  and  sale  of  said  premises;  and  on 
the  31st  day  of  March,  1851,  said  premises  were  put  up  for  sale 
under  said  decree,  and  struck  off  to  said  Joseph  B.  Bidleman, 
as  the  purchaser,  for  the  sum  of  eight  hundred  and  fifty-eight 
dollars,  but  in  fact  for  the  benefit  of  said  defendant  Blankman; 
and  on  the  1st  day  of  April,  1851,  the  sheriff  executed  a  deed 
to  said  J.  B.  Bidleman,  as  such  purchaser,  who  took  the  same 
in  trust  and  for  the  benefit  of  said  Blankman. 

Afterward,  and  in  the  month  of  April,  1851,  the  said  Blank- 
man caused  an  action  to  be  commenced  and  prosecuted  in  the 
District  Court  of  the  Fourth  District,  in  the  name  of  the  said 
Bidleman,  as  "plaintiff,  but  for  the  benefit  of  said  Blankman,  and 
against  the  said  Mary  Hina,  as  defendant,  to  recover  possession 
of  said  lands  and  premises,  and  such  proceedings  were  had  that 
judgment  was  recovered  in  favor  of  the  plaintiff  therein  for  the 
possession  of  said  premises;  a  writ  of  execution  was  issued  on 
said  judgment,  and  was  executed  on  the  12th  day  of  June,  1851, 
by  removing  said  Mary  Hina  from  the  premises,  and  putting  said 
Bidleman  in  possession  thereof. 

On  the  20th  day  of  December,  1851,  the  said  J.  B.  Bidle- 
man made,  executed,  and  delivered  to  said  Blankman  a  deed  of 
conveyance  of  said  premises,  which  conveyance  was  therein  ex- 
pressed to  be  for  the  consideration  of  fifteen  hundred  dollars, 
but  no  consideration  was  in  fact  paid,  or  agreed  to  be  paid ;  and 
such  conveyance  was  made  at  the  request  of  said  Blankman,  and 
without  any  consideration,  which  said  conveyance  was  acknowl- 
edged and  duly  recorded  in  the  office  of  the  recorder  of  the 
county  of  San  Francisco,  on  the  3d  day  of  January,  1852. 

Said  Mary  Hina  left  and  removed  from  the  city  and  county 
of  San  Francisco  about  the  month  of  June,  1851,  and  after  she 
was  removed  from  the  premises  under  the  aforesaid  writ  of 


IN  THE  SUPREME  COURT  OF  CALIFORNIA.  151 

execution,  and  has  ever  since  resided  in  the  county  of  El  Dorado, 
in  this  state,  more  than  one  hundred  and  fifty  miles  from  the  city 
of  San  Francisco,  and  never  returned  to  the  said  city  and  county 
till  after  the  commencement  of  this  action. 

On  the  18th  day  of  April,  1851.  the  said  Blankman  ren- 
dered his  final  account,  and  was  discharged  by  the  order  of  the 
Probate  Court  from  his  office  as  administrator  of  said  estate. 

On  the  28th  day  of  February,  1861,  the  said  Mary  Hina  sold, 
assigned,  transferred,  and  conveyed  to  the  plaintiff  the  said  lands 
and  premises,  and  all  her  'rights  and  interests  therein  and  her 
claim  thereto,  and  to  the  rents  during  the  time  the  said  Blank- 
man had  held  and  enjoyed  the  same. 

In  1861,  just  before  the  commencement  of  the  action,  Bidle- 
man  first  informed  Mary  Hina  that  he  had  purchased  the  prop- 
erty in  trust  for  Blankman,  and  at  Blankman's  request,  and  paid 
110  consideration  for  it.  Blankman  had  never  given  her  this 
information. 

The  court  below  found  that  there  was  no  fraud  in  fact,  and 
also  found  that  the  knowledge  that  the  purchase  and  sale  of  the 
property  at  the  probate  and  foreclosure  sales  were  made  in  trust 
for  the  defendant  Blankman,  came  to  the  knowledge  of  Mary 
Hina  more  than  five  years  before  the  commencement  of  the 
action. 

The  action  was  commenced  in  March,  1861.  The  court 
below  rendered  a  judgment  for  defendant,  and  plaintiff  appealed. 
The  other  facts  are  stated  in  the  opinion  of  the  court. 

Doyle  and  Barber  and  Delos  Lake,  for  appellant.  E.  W.  F. 
Sloan,  for  respondent. 

By  the  Court,  RHODES,  J.  This  action  was  brought  to 
establish  and  enforce  a  trust  in  favor  of  the  plaintiff,  as  the 
grantee  and  assignee  of  Mary  Hina,  the  heir  at  law  of  Jack  Hina, 
deceased,  as  to  certain  premises,  that  the  defendant  purchased 
at  his  own  sale  as  administrator ;  and  as  incidental  to  the  relief 
sought  in  respect  to  the  alleged  trust,  the  plaintiff  prayed  for  an 
account  of  the  rents  and  profits,  and  for  the  delivery  of  the  pos- 
session of  the  premises. 

The  mortgage  executed  by  Jack  Hina  in  his  life-time,  which 


152  BO  YD  v.  BLANKMAN, 

it  is  alleged  the  defendant  fraudulently  procured  to  be  assigned 
and  foreclosed,  and  the  sale  and  conveyance  of  the  premises 
which  it  is  alleged  were  fraudulently  made  for  the  benefit  of  the 
defendant,  may  be  dismissed  from  consideration,  except  so  far  as 
those  matters  bear  upon  the  question  of  fraud  in  procuring  the 
order  of  sale  from  the  Probate  Court,  as  the  legal  title,  which 
was  then  in  Mary  Hina,  was  unaffected  by  those  proceedings, 
because  she  was  not  made  a  party  to  the  foreclosure  suit.  The 
questions  we  shall  first  consider,  grow  out  of  the  fact  charged  by 
the  plaintiff,  and  found  by  the  court  below,  that  the  defendant, 
while  acting  as  one  of  the  administrators  of  Jack  Hina,  deceased, 
purchased  the  premises  per  interpositam  personam  at  his  own 
sale,  which  he  made  under  the  order  of  the  Probate  Court.  It 
is  alleged  in  the  complaint  that  the  proceedings  in  the  Probate 
Court,  for  the  purpose  of  procuring  the  sale,  and  the  sale  itself, 
and  all  proceedings  connected  therewith,  are  whoHy  fraudulent 
and  void.  The  plaintiffs  counsel,  however,  contends  that  the 
sale  is  void  only  at  the  instance  of  the  cestui  que  trust,  that  is  to 
say,  that  the  sale  is  voidable.  His  position  is,  that  Blankman,  in 
selling  the  property  as  administrator,  acted  as  the  trustee  of  the 
heir ;  that  his  sale  to  himself  did  not  discharge  the  trust ;  that  the 
heir,  as  the  cestui  que  trust,  possessed  the  right  to  affirm  or  dis- 
affirm the  sale,  and  that  such  right  was  incident  to  the  equitable 
estate  which  she  possessed  in  the  property.  The  defendant's 
position  is,  that  the  sale  was  voidable  only  at  the  election  of  the 
heir,  and  coupled  with  that,  is  the  further  position  that  by  the 
sale  she  became  divested  of  every  assignable  right  or  interest  in 
the  land. 

Effect  of  purchase,  by  an  Administrator,  at  Ms  own  sale, 
made  by  order  of  the  Probate  Court,  of  Land  belonging  to  the 
Estate. — We  may  say  here,  that  we  can  not  assent  to  the 
latter  position  of  the  defendant.  If  it  is  admitted  that  any- 
thing passed  by  the  sale,  it  must  be  conceded  that  the  legal  title 
passed ;  and  after  the  admininstration  is  closed  it  would  be  diffi- 
cult to  charge  the  defendant  as  trustee  in  respect  to  the  real 
property,  unless  he  was  vested  with  the  legal  title  ;  but  in  regard 
to  the  equitable  title,  we  are  of  the  opinion  that  Mary  Hina,  by 
her  deed  to  the  plaintiff,  gave  evidence  of  her  determination  to 
disaffirm  the  sale  ;  that  at  the  time  of  its  execution  she  held  the 


IN  THE  SUPREME  COURT  OF  CALIFORNIA.  153 

equitable  title  as  fully  as  before  the  sale,  and  that  by  her  deed 
she  conveyed  such  equitable  title  to  the  plaintiff.  And  it  admits 
of  serious  doubt  whether  the  sale,  confessedly  in  contravention  of 
the  rules  of  equity,  even  temporarily  "  set  afloat  "  her  equita- 
ble interest,  so  that  an  act  of  disaffirmance  was  necessary  in 
order  to  attach  it  again  to  the  property.  There  are  strong  rea- 
sons for  holding  that  upon  a  sale  of  this  character,  the  relation  of 
the  cestui  que  trust  is  not,  by  that  fact  alone,  shifted  from  the 
property  to  the  proceeds  of  the  sale,  but  that  in  order  to  cut  her 
off  from  any  recourse  upon  the  land,  and  restrict  her  to  the  pro- 
ceeds, there  must  be  either  some  positive  act  of  affirmance  of  the 
sale,  or  such  an  acquiescence  in  it,  manifested  by  the  receipt  of 
the  proceeds,  or  by  a  delay  beyond  the  period  fixed  by  the  Stat- 
ute of  Limitation,  in  commencing  proceedings  to  set  it  aside,  or 
in  some  other  manner,  that  the  Court  will  deem  it  equivalent  to, 
and  presumptively  a  ratification  of  the  sale.  By  her  disaffirm- 
ance, she  elects  to  have  the  legal  title  held  as  it  was  before  the 
sale,  and  have  the  property  remain  subject  to  all  the  trusts  with 
which  it  was  formerly  charged.  In  the  absence  of  a  disaffirm- 
ance, that  is  to  say,  of  an  assertion  of  her  interest  in  the  land 
within  a  reasonable  time,  the  equitable  interest  of  the  cestui  que 
trust  is  presumed  to  have  become  united  to  the  legal  title,  in  the 
hands  of  the  trustee  holding  adversely  to  the  cestui  que  trust.  An 
illustration  may  be  found  in  the  case  of  a  will,  that  gives  to  any 
legatee  a  portion  of  the  estate  of  the  testator,  and  to  another 
legatee  some  of  the  first  legatee's  property.  The  will,  of  itself, 
does  not  divest  the  first  legatee  of  any  title  to  his  own  property, 
but  his  affirmance  of  the  disposition  made  by  the  will,  manifested 
by  his  election  to  take  under  it,  is  held  in  equity  to  pass  his  inter- 
est in  what  was  his  own  property  to  the  second  legatee  ;  and  if 
he  relies  upon  his  right,  independent  of  the  will,  it  can  not  be 
said  that  he  was,  at  any  time,  even  temporarily  divested  of  the 
title  to  his  property  that  was  attempted  to  be  bequeathed.  The 
right  of  election  in  the  cestui  que  trust  to  affirm  or  disaffirm  the 
sale  must  have  for  its  support  some  interest  in  the  premises  sold. 
He  can  not  acquire  the  equitable  title  by  mere  assertion,  nor  can 
it  with  much  show  of  reason  be  said,  that  by  indicating  his  election 
to  have  the  legal  title  restored  to  its  original  status,  he  acquires 
any  right  or  title  he  did  not  possess  before  making  the  election. 


154  BO  YD  v.  BLANKMAN, 

Sale  of  Trust  Estate  and  purchase  of  same  by  the  Trustee  who 
holds  the  legal  title. — In  a  case  where  the  trustee  holds  the  legal 
title,  and  the  trust  is  to  be  executed  by  a  sale  of  the  property  for 
money,  and  the  trustee  becomes  the  purchaser,  and  holds  in  his 
hands  the  money  representing  the  purchase  money,  ready  to  be 
paid  over  to  the  cestui  que  trust,  the  money,  evidently,  is  not  the 
money  of  the  cestui  que  trust,  as  it  would  be  considered  had  the 
sale  been  properly  made  to  a  third  person,  and  it  does  not  be- 
come his  property  until  he  elects  to  affirm  the  sale  and  receive 
the  money  ;  and  if  it  is  true  that  the  purchase  by  the  trustee 
divests  the  cestui  que  trust  of  his  equitable  interest  in  the  land, 
then  it  follows  that  there  is  a  time — the  time  intervening  between 
the  sale  and  the  election  by  the  cestui  que  trust — that  he  owns 
neither  an  interest  in  the  land  nor  the- money  arising  from  its  sale. 
Instead  of  saying,  in  the  language  of  many  of  the  cases,  that  the 
sale,  as  between  the  trustee  and  cestui  que  trust,  ts  good  unless 
the  cestui  que  trust  elects  to  avoid  it,  is  it  not  more  accurate  to 
hold  that  the  sale  will  become  good,  unless  the  cesiui  que  trust 
elects  to  avoid  it,  before  its  ratification  may  be  presumed  from 
the  lapse  of  time  or  other  sufficient  circumstances  ? 

Is  the  purchase  by  an  administrator,  of  the  land  of  the  estate, 
at  his  own  sale,  void,  or  is  it  merely  voidable  f  [That  part  of  the 
opinion  embraced  under  this  heading  is  omitted,  because  of  its 
being,  to  a  great  extent,  a  repetition  of  the  same  rules  governing 
the  trustee,  as  will  be  found  in  Davotie  v.  Fanning,  preceding 
page  1,  and  the  other  authorities  to  this  point  quoted  therein. 
As  shown  in  the  Syllabus,  the  court  decided  what  is  now  almost 
universally  admitted  to  be  the  rule  :  That  such  sales  are  voidable 
on  the  election  of  the  cestui  que  trust.  That  part  of  the  opinion 
treating  of  the  "  Statutes  of  Limitations  "  is  also  omitted.  The 
Syllabus  gives  the  result  arrived  at  by  the  court.] 

Fraud  by  an  Administrator  in  procuring  an  order  of  sale  of 
land  without  necessity. — Actual  fraud  is  alleged  and  relied  on  by 
the  plaintiff,  and  he  assigns  as  error  the  finding  of  the  court 
against  him  on  that  issue.  The  fraud  complained  of,  stated 
generally,  consisted  in  the  administrator's  having  procured  an 
order  of  sale  from  the  Probate  Court,  when  there  was  no  neces- 
sity for  it.  He  represented  in  his  petition,  filed  December  1 8th, 
1850,  that  the  estate  was  indebted  seven  hundred  and  seventy 


IN  THE  SUPREME  COURT  OF  CALIFORNIA.  155 

dollars  on  the  Biron  mortgage,  and  about  two  hundred  dollars  for 
other  debts,  and  that  the  personal  property  was  insufficient  to 
pay  the  debts  and  the  expenses  of  administration.  His  final 
account,  filed  April  2,  1851,  shows  that  on  the  23d  of  October, 
1850,  he  received  from  Mary  Hina  eight  hundred  and  ninety 
dollars  on  account  of  the  estate.  Instead  of  applying  the  money 
to  the  satisfaction  of  the  mortgage,  he  purchased  it  in  the  name 
of  Bidleraan,  for  his  own  benefit.  Doubtless  the  interest  for  two 
months — one  hundred  and  forty  dollars — was  paid  out  of  the 
money  paid  to  him  by  Mary  Hina.  So  far  as  the  order  of 'sale 
is  concerned,  and  the  fraud  imputed  to  the  defendant  in  procur- 
ing it,  without  any  necessity,  it  would  make  no  difference  whether 
he  left  the  mortgage  unpaid  in  Biron's  hands  or  caused  it  to  be 
assigned  to  himself  or  to  some  third  person  for  his  use,  for, 
having  the  funds  in  his  hands,  that  might  and  ought  to  have  been 
applied  to  the  satisfaction  of  the  mortgage,  he  should  have  taken 
the  necessary  steps  to  have  procured  an  order  that  the  funds  in 
his  hands  be  applied  to  that  purpose  ;  and  the  wrong  consists  in 
the  fact  that  he  procured  an  order  of  sale  to  raise  money  to  satisfy 
a  debt,  which  either  had  been  paid  or  ought  to  have  been  paid 
out  of  moneys  in  his  hands  belonging  to  the  estate.  The  admin- 
istrator was  without  justification,  so  far  as  appears  from  the  evi- 
dence, in  procuring  an  order  of  sale  to  raise  means  to  pay  that 
debt.  The  payment  might  have  been  made  soon  after  the  receipt 
of  the  money  in  October,  and  at  that  time  the  payment  of  .the 
mortgage  and  two  months'  interest,  requiring  eight  hundred  and 
forty  dollars,  would  have  left  in  his  hands  fifty  dollars.  It  is  not 
charged,  nor  does  it  appear  in  the  case,  that  any  of  the  property 
of  the  estate,  except  the  sum  of  eight  hundred  and  ninety  dollars, 
and  the  lot  in  controversy,  came  to  the  possession  of  the  defend- 
ant, and  we  may  presume  that  the  articles  included  in  the  inven- 
tory under  the  items  "stoves,  chairs,  and  household  furniture, 
two  hundred  dollars  ;  trunk  and  clothes,  one  hundred  dollars," 
remained  in  the  possession  of  the  widow  of  the  deceased ;  and  it 
is  not  alleged  that  they  came  to  the  defendant's  hands.  At  the 
time  of  filing  the  petition  for  sale,  there  had  been  allowed  the 
claims  of  appraisers  and  others,  amounting  to  two  hundred  and 
ten  dollars,  and  although  the  claims  may  seem  exorbitant,  yet 
they  had  been  allowed  by  the  probate  judge  as  well  as  by  the 


156  BO  YD  v.  BLANKMAN, 

administrator ;  and,  as  valid  claims  against  the  estate,  they,  to- 
gether with  the  administrator's  fees,  accruing  and  accrued,  were 
required  to  be  paid;  and  the  administrator,  not  having  funds  in 
his  hands  sufficient  for  that  purpose,  was  authorized  and  it  was 
his  duty  to  have  raised  the  required  funds  out  of  the  real  estate 
by  sale  or  otherwise.  A  sale  of  a  small  portion  of  the  real  estate 
would  probably  have  been  sufficient ;  but  the  Probate  Court  had 
jurisdiction,  and  we  think  the  exclusive  jurisdiction,  to  determine 
what  portion  of  the  real  estate  Should  be  sold  for  that  purpose  ;  and 
although  the  court  may  have  erred  in  that  respect,  its  judgment  can 
not  be  revised  or  set  aside  in  this  collateral  manner.  The  error  can 
be  reached  only  by  an  appeal  taken  directly  from  the  order  of  that 
court  (a). 

And  the  same  may  be  said  in  respect  to  the  order  of  sale,  so 
far  as  it  is  founded  on  the  alleged  indebtedness  on  the  mortgage, 
conceding  that  it  had  been  paid  (considering  the  assignment  to 
Bidleman  for  the  defendant  as  a  payment  by  the  estate,  or  as 
vesting  the  mortgage  in  the  estate),  or  that  it  was  not  a  sub- 
sisting claim  against  the  estate,  or  that  it  ought  to  have  been 
paid  by  the  administrator,  still  those  were  facts  to  have  been 
proven  before  the  Probate  Court,  on  the  hearing  of  the  petition 
for  sale.  It  is  manifest  that  it  was  quite  susceptible  of  proof, 
that  the  administrator  had  in  his  hands  funds  that  should  have 
been  used  for  that  purpose,  and  if  those  interested  in  the  estate 
failed  to  offer  the  evidence,  they  are  in  default ;  and  if  it  was  of- 
fered and  was  rejected  by  the  court,  or  having  been  received, 
the  court,  notwithstanding  the  evidence,  ordered  the  lot  to  be 
sold  for  the  payment  of  the  mortgage,  it  was  error  which  might 

(a)  In  Slight's  Ilei™  v.  Tobin,  1  Mon.  612,  the  court  says:  "We  do  not  mean 
that  a  chancellor,  in  exercising  this  jurisdiction,  will  act  as  a  revising  court  over 
the  records  of  a  court  of  law  in  executing  their  process,  or  make  further  use  of 
errors  of  law  than  to  prove  or  disprove  the  fairness  or  unfairness  of  the  sale.  We 
will  treat  all  the  proceedings  at  law  as  valid,  although  error  may  appear  therein, 
and  will  relieve  against  the  consequences  thereof,  because  the  rights  acquired 
thereby  can  not  be  retained  in  conscience ;  and  in  doing  so,  we  will  treat  the  pur- 
chaser as  a  trustee  of  the  estate,  and  will  not  compel  him  to  surrender  it  until 
equity  is  done  to  him."  See,  also,  Talbott  v.  Todd,  6  Dana,  193  :  Bill  to  impeach 
decree  on  the  ground  of  fraud.  Per  curiam :  "  Where  a  fraud  has  been  practiced 
by  reason  of  the  confidential  relation  of  the  parties,  and  carried  into  the  decree,  it 
will  not  sanctify  the  fraud,  or  put  it  beyond  the  power  of  a  chancellor  to  rectify  the 
matter.'' 


IN  THE  SUPREME  COURT  OF  CALIFORNIA. )<-M~  157 

have  been  corrected  on  appeal;  but  if  not  so  corrected,  was 
final  and  conclusive  upon  the  parties  to  the  petition.  The  fraud 
then,  in  procuring  the  order  of  sale,  so  far  as  the  mortgage  debt 
is  concerned,  amounts  to  this:  that  the  administrator  procured 
an  order,  either  upon  insufficient  evidence,  or  contrary  to  the 
evidence  that  was  accessible  to  the  heir  at  law,  and  was  or  might 
have  been  introduced  by  her,  which,  instead  of  being  a  fraud  of 
which  another  court  will  take  cognizance,  is  but  the  case  of  an 
error  in  the  judgment  of  the  Probate  Court,  or  of  neglect  on  the 
part  of  one  of  the  parties  to  present  his  case ;  and  we  agree  with 
the  learned  judge  of  the  court  below  in  his  finding,  that  there 
was  no  actual  fraud  in  procuring  the  order  of  sale,  and  in  hold- 
ing that,  in  relation  to  the  necessity  of  the  sale,  the  plaintiff  is 
concluded  by  the  order  declaring  that  it  was  necessary,  and 
directing  it  to  be  made. 

Ignorance  as  a  ground  of  relief  in  Equity. — It  is  proper  to 
remark  here,  that  we  do  not  concede  as  much  force  and  conse- 
quence, as  do  the  counsel  for  the  plaintiff,  to  the  fact  that  Mary 
Hina  was  an  ignorant  Kanaka  woman,  unacquainted  with  legal 
proceedings,  and  almost  ignorant  of  our  language.  We  can  not 
obliterate  the  recognized  rules  of  law,  requiring  of  all  persons 
the  diligence  and  attention  demanded  of  a  prudent  man  in  the 
transaction  of  his  own  business,  and  establish  a  measure  of  care 
and  diligence  for  each  particular  case.  If  she  did  not  under- 
stand the  value  of  the  receipt  she  said  Blankman  gave  her  for 
the  money  she  paid  him,  or  if  she  did  not  comprehend  the 
meaning  or  the  object  of  the  petition  for  sale,  unless  it  is  also 
proven  that  she  relied  upon  Blankman  for  information  respecting 
these  matters,  and  that  he  misrepresented  them,  her  ignorance  of 
their  objects,  value,  and  meaning,  affords  no  grounds  for  relief. 

Judgment  reversed,  and  cause  remanded  for  a  new  trial. 

Mr.  Justice  CURREY  and  Mr.  Justice  SAWYER,  being  disqual- 
ified, did  not  sit  in  the  cause. 


1 58  »i  ((SUPERVISORS  OF  KANE  COUNTY  v.  HERRINGTON, 


THE  BOARD  OF  SUPERVISORS  OF  KANE  COUNTY,  et  al,  v. 
AUGUSTUS  M.  HERRINGTON,  et  al. 

[This  case  was  decided  at  the  January  term,  1869,  of  the  Supreme  Court 
of  the  State  of  Illinois,  SIDNEY  BREESE,  Chief  Justice,  and  CHAS.  B.  LAW- 
RENCE and  PINKNEY  H.  WALKER,  Jtistices,  the  opinion  being  delivered  by 
Justice  WALKER.  Reported  in  50  Illinois,  232.] 

When  the  owner  of  a  claim  to  Government  land  sold  a  portion  of  his  claim  to  an- 
other, and  the  vendee,  in  consideration  thereof,  agreed  to  pay  to  the  Govern- 
ment the  money  necessary  to  secure  the  remaining  interest  in  such  claim 
to  his  vendor,  and  the  money  was  paid,  but  before  it  was  paid  the  vendor 
died,  the  money  so  in  the  hands  of  the  vendee  was  held  in  trust  for  the  heirs 
of  the  vendor,  and  when  applied  to  the  purchase  of  the  remaining  interest 
in  the  land,  the  equitable  interest  of  the  heirs  in  the  money  attached  to  the 
land,  and  an  estate  in  trust  in  favor  of  the  minor  heirs  "resulted  therefrom. 

Resulting  trusts  are  not  embraced  in  the  statute  of  frauds,  but  only  express 
trusts,  resting  in  parol,  or  other  verbal  agreements  for  the  sale  of  lands,  are 
within  the  purview  of  the  statute. 

Where  property,  in  which  minor  heirs  have  an  equitable  interest,  is  being  im- 
proved by  the  party  claiming  the  legal  title,  they  are  not  bound  to  give  no- 
tice of  their  rights,  and  would  not  be  estopped  because  of  their  failure  to  do 
8.0;  for,  as  minors,  they  are  not  capable  of  estopping  themselves,  simply  by 
failure  to  assert  title. 

If  persons  who  have  an  equitable  claim  to  real  estate,  assent  to,  and  acquiesce 
in,  acts  performed  in  relation  to  such  estate,  by  one  holding  the  same  in 
trust  for  the  equitable  claimants,  such  acts  of  the  trustee  being  inconsistent 
with  their  equitable  yights,  they,  by  such  assent  and  acquiescence,  will  be 
estopped  from  afterward  asserting  their  equitable  claim. 

The  time  in  which  equitable  claim  to  realty  should  be  asserted,  is  controlled  by 
the  analogies  of  the  law;  and,  if  twenty  years  are  allowed  to  elapse,  after 
the  statutory  disability  of  the  claimant  ceases,  without  asserting  such  claim, 
he  is  thereby  placed  without  the  pale  of  chancery  relief. 

As  a -general  rule,  a  tenant  is  estopped  from  questioning  his  landlord's  title,  when 
sued  for  possession.  But  when,  upon  eviction  under  a  paramount  outstand- 
ing title,  he  has  attained  to  the  true  owner,  he  is  not  estopped  from  setting  up 
the  eviction,  and  the  title  under  which  the  eviction  was  had,  as  against  the 
claim  of  his  lessor. 

So,  also,  when  the  landlord  has  aliened  the  demised  premises,  and  sues  the  tenant 
in  ejectment,  the  tenant  may  defeat  the  recovery  by  setting  up  the  convey- 
ance. But,  as  in  this  case,  where  a  party,  holding  the  equitable  title  to  real 
estate,  takes  a  lease  from  the  party  holding  the  legal  title,  the  former  is  not 
estopped  from  asserting  his  equitable  title  as  against  his  lessor,  the  latter 
being  left,  precisely,  and  in  every  particular,  in  the  same  position  he  was 
before  the  leasing,  having  incurred  no  further,  other,  or  greater  liability  in 
regard  to  the  premises  in  controversy. 


IN  THE  SUPREME  COURT  OF  ILLINOIS.  159 

The  regularity  of  the  proceedings  in  a  submission  to  arbitration  can  not  be  ques- 
tioned, where,  by  long  acquiescence,  it  has  acquired  such  force  that  the  par- 
ties in  interest  would  be  held  to  its  terms.  So,  where  a  bill  in  chancery,  to 
compel  a  conveyance  of  certain  premises,  was  filed  February  5,  1864,  the 
defendants  can  not  set  up  any  irregularity  in  the  proceedings  in  a  submis- 
sion to  arbitration,  which  occurred  June  5,  1838,  to  defeat  the  claimant's  title 
to  any  portion  of  the  premises  in  controversy. 

In  a  suit  in  chancery,  brought  by  heirs,  a  disclaimer  by  one  or  more  of  the  heirs, 
to  any  interest  in  the  premises  in  controversy,  does  not  vest  the  interest  so 
disclaimed  in  the  remaining  heirs. 

A  owned  a  claim  to  Government  land,  and  sold  a  portion  of  his  claim  to  B,  in 
consideration  that  B  would  pay  the  Government  a  sum  sufficient  to  secure 
the  title  to  the  remaining  portion  in  A.  Afterward  A  died,  and  the  purchase 
by  B  was  made  and  perfected  after  his  death.  Held,  that  B  held  the  money  in 
trust  for  the  heirs  of  A,  and  that,  by  a  subsequent  payment  of  the  money  to 
the  Government,  the  equitable  interest  of  the  heirs  in  the  money  attached  to 
the  land,  and  an  estate  in  trust  was  thereby  created.  But  after  the  death  of 
A,  and  before  the  money  was  paid  by  B  to  perfect  the  title  in  the  heirs  of  A 
to  the  remaining  portion  of  his  claim,  one  of  the  heirs  died.  Held,  that  such 
heir,  having  died  before  the  money  so  in  the  hands  of  B  passed  into  the  land 
by  the  subsequent  purchase,  did  not  have  an  estate  of  inheritance  in  such 
purchase  that  could  pass  by  descent  to  his  heirs. 

APPEAL  from  the  Superior  Court  of  Chicago,  the  Hon.  JOHN 
A.  JAMESON,  Judge,  presiding. 

This  was  a  bill  in  chancery,  exhibited  in  the  Kane  County 
Circuit  Court.  The  cause  was  removed  by  a  change  of  venue 
to  the  Superior  Court  of  Chicago.  The  bill  was  filed  February 
5.,  1864,  and  upon  the  hearing  a  decree  for  the  claimants  was 
entered.  The  defendants  below  bring  the  cause  to  this  Court. 
The  further  facts  in  this  case  are  fully  stated  in  the  opinion. 

Messrs.  Gookins  and  Roberts,  for  the  appellants.  Messrs. 
Miller,  Van  Arman,  and  Letvis,  for  the  appellees. 

Mr.  Justice  WALKER  delivered  the  opinion  of  the  Court. 
The  widow  and  heirs  of  James  Herrington,  deceased,  filed  their 
bill  in  the  Kane  Circuit  Court,  against  the  board  of  supervisors 
and  others,  as  officers  and  agents  of  the  county,  to  enjoin  a  sale 
and  compel  a  conveyance  of  lots  9  and  10,  in  block  52,  in 
the  town  of  Geneva.  It  appears  that  the  lots  had  been  for 
many  years  used  for  county  purposes,  and  on  which  a  court- 
house, jail,  and  recorder's  office  had  been  erected.  The  bill 
alleges  that  the  county  holds  the  property  in  trust  for  com- 


160      SUPERVISORS  OF  KANE  COUNTY  v.  HERRINGTON, 

plainants,  and  seeks  to  have  the  trust  executed  by  a  con- 
veyance. 

The  bill  alleges  that  one  Haight,  in  the  year  1835,  settled 
on  the  quarter  of  land,  of  which  the  lots  in  controversy  are  a 
part,  and  that  the  land  was  then  unsurveyed;  that  he  sold  his 
claim  to  Herrington,  the  ancestor  of  complainants,  who  went 
into  possession  and  resided  on  it  until  his  death,  which  occurred 
in  1839.  After  his  death  his  widow  and  heirs  continued  to  re- 
side on  a  portion  of  the  tract;  in  June,  1836,  Herrington  sold 
an  undivided  three-fourths  of  his  claim,  excepting  two  acres  on 
which  his  house  stood,  to  one  Hamilton,  who  afterward  sold  dif- 
ferent portions  to  various  persons;  in  June,  1836,  the  commis- 
sioners appointed  for  the  purpose,  located  the  county-seat  on  this 
claim ;  that  Herrington  and  Hamilton  laid  out  the  village  of 
Geneva  on  this  claim,  and  recorded  the  plat ;  proceedings  were 
instituted  in  the  Kane  Circuit  Court  for  the  purpose  of  obtain- 
ing partition  among  the  several  claimants  of  the  property ;  this 
proceeding  was  commenced  at  the  May  term,  1840,  of  the  Cir- 
cuit Court,  and  Daniels,  Hamilton,  and  Madden  were  plaintiffs, 
and  Herrington  was  defendant.  From  these  proceedings  it  ap- 
pears that,  on  the  5th  of  June,  1838,  these  parties  entered  into 
an  arbitration  bond,  by  which  King,  Hubbard,  and  Dunham 
were  chosen  to  arbitrate,  award,  order,  appraise,  divide,  and  set 
apart  and  determine  the  parts  of  the  town  of  Geneva  to  which 
the  parties,  and  those  claiming  under  them,  were  entitled.  Her- 
rington's  two  acres,  and  certain  other  portions  of  the  property, 
including  that  in  controversy,  were  excluded  from  the  submis- 
sion, and  reserved  to  Herrington. 

In  1840,  the  lands  in  that  section  of  the  state  having  been 
surveyed,  it  was  found  that  the  tract  upon  which  the  county- 
seat  had  been  located  was  the  south-east  quarter  of  section  3, 
township  39,  range  8.  This  land  was  purchased  by  the  county 
in  1841,  the  complainants  furnishing  their  share,  and  other  per- 
sons interested  the  residue  of  the  purchase-money,  they  holding 
the  equitable,  and  the  county  the  legal,  title  to  the  quarter. 

The  answer  denies  that  complainants  had  a  pre-emption 
right ;  admits  Herrington's  death  and  the  heirship  of  complain- 
ants ;  insists  that  the  county  was  not  bound  by  the  arbitration 
proceedings,  as  they  were  void,  because  neither  the  county,  nor 


IX  THE  SUPREME  COURT  OF  ILLINOIS. 


its  grantor,  were  parties  to  it;  because  the  Government  then 
owned  the  land ;  admits  the  laying  out  of  the  town,  and  the 
purchase  by  the  county  in  1841,  but  denies  that  complainants 
then  claimed  any  interest  in  the  land,  or  furnished  any  portion 
of  the  purchase-money ;  that  by  general  consent  of  the  citizens, 
who  furnished  the  purchase-money  to  enter  the  land,  there  was 
conceded  to  Mrs.  Herrington  the  interest  which  her  husband 
claimed  in  the  property  in  1838,  on  her  paying  the  cost  and 
expenses,  pursuant  to  which  understanding  the  county  has,  from 
time  to  time,  conveyed  to  her,  or  to  others  on  her  request,  her 
share,  all  of  which  had  been  done  prior  to  1854. 

That  in  1837—8  a  court-house  and  jail  were  erected,  on  41 
and  43,  where  they  continued  until  1843,  at  which  time,  owing 
to  the  principal  settlement  of  the  town  being  along  Fox  River, 
and  the  desire  of  the  citizens  for  their  removal,  their  location 
was  changed.  Mrs.  Herrington  then  occupied  block  53,  when 
it  was  agreed  between  her  and  the  county,  that  in  lieu  of  any 
interest  she  had  in  the  lots  in  controversy,  she  should  take  lots 
1  and  2,  in  block  51,  which  arrangement  was  carried  into  effect, 
and  the  county  proceeded  to  erect  the  court-house,  jail,  and 
recorder's  office  on  the  lots  in  controversy;  that  these  buildings 
were  used  by  the  county  until  in  1858,  when  new  county  build- 
ings were  erected  in  another  locality,  to -which  the  county  rec- 
ords were  removed ;  that  Augustus  M.  Herrington,  on  the 
removal  of  the  county  records,  took  a  lease  of  the  recorder's 
office  for  three  years,  at  a  rent  of  $40  per  annum,  conditioned 
that,  should  the  property  be  sold,  he  would  render  possession ; 
that  the  county  owned  lots  1  and  2,  in  block  51,  in  fee,  and  they 
so  remained  until  1853,  when,  on  the  written  request  of  Mrs. 
Herrington,  they  were  conveyed  to  complainant,  James  Herring- 
ton.  It  is  alleged  that  complainant  knew  the  facts,  and  recog- 
nized the  right  of  their  mother  to  contract  and  dispose  of  the 
property,  and  knew  of  the  conveyances  made  on  her  orders, 
and  to  which  they  never  interposed  any  objection;  that  James 
still  claims  lots  1  and  2,  in  block  51,  and  has  never  offered  to 
reconvey  them.  The  answer  relies  upon  an  estoppel  in  pais  by 
the  various  acts  of  complainants,  also  upon  possession  for  over 
twenty  years,  and  the  staleness  of  complainants'  claim. 

It  appears  that  Mrs.  Tuthill,  one  of  the  heirs,  and  her 

11 


1G2      SUPERVISORS  OF  KANE  COUNTY  v.  HERRINGTON, 

husband,  entered  a  disclaimer  of  any  claim  to  any  interest  in 
the  land,  and  the  bill  was  dismissed  as  to  them,  by  an  order  of 
the  court.  The  evidence  also  discloses  that  Herrington,  in  his 
life-time,  sold  an  interest  in  some  water-power,  situated  on  his 
claim,  to  one  Strode,  and  he,  by  a  written  contract  then  exe- 
cuted, agreed  to  advance  the  money  necessary  to  pay  the  Gov- 
ernment for  Herrington's  fourth  of  the  quarter.  Strode  after- 
ward sold  his  claim  to  Sterling,  who  obligated  himself  to  pay 
that  amount  for  the  entry  of  the  land,  and  he  testifies  that  he 
did  pay  the  necessary  sum  to  Fletcher  for  the  purpose,  and  the 
latter  swears  that  he  used  it  in  entering  the  land.  Thus  it  is 
seen  that  the  money  used  for  the  purchase  of  the  Herrington 
interest  was  due  to  the  estate,  and  in  which  the  heirs  had  an 
equitable  interest,  and  it  was  applied  to  the  purchase  of  a  claim 
and  improvements  held  by  their  father  at  the  time  of  his  death. 

And  as  the  money  to  which  the  heirs  were  equitably  entitled 
was  employed  in  purchasing  the  land  and  improvements  upon 
which  their  father  lived,  at  the  time  of  his  death,  the  equity  in 
the  money  attached  to  the  land,  and  as  their  money  paid  for  the 
land,  without  their  consent,  they  being  minors  and  incapable  in 
law  of  consenting,  the  law  implied  a  trust  which  resulted  in  their 
favor  when  the  land  was  purchased,  and  the  county  became  their 
trustee,  and  this  trust  Was  fully  recognized  by  the  county  in  ref- 
erence to  this  as  well  as  other  interests,  when  Fletcher  was  ap- 
pointed as  the  agent  of  the  county  to  make  deeds  of  conveyance 
on  behalf  of  the  county,  so  as  to  vest  in  these,  and  other  bene- 
ficiaries the  legal  title.  And  he,  supposing  that  Mrs.  Herrington 
had  the  legal  right  to  control  this  interest,  at  various  times  made 
conveyances  to  different  persons  on  her  request,  who  no  doubt 
thus  acquired  title,  unless  chargeable  with  notice  of  the  equitable 
interest  of.  the  heirs. 

The  heirs,  then,  having  become  vested  with  this  interest 
as  a  resulting  trust,  the  statute  of  frauds,  could  not  avail,  even 
had  it  been  relied  on  in  the  pleadings.  It  has  been  repeatedly 
held  that  such  trusts  are  not  embraced  within  the  statute,  but 
only  express  trusts  resting  in  parol,  and  other  verbal  agreements 
for  the  sale  of  lands,  are  within  the  purview  of  the  statute.  It 
then  follows  that  these  complainants  were,  in  equity,  entitled  to 
the  portion  of  the  lands  awarded  to  Herrington,  and  the  lots  in 


IN  THE  SUPREME  COURT  OF  ILLINOIS.  163 

controversy  are  a  part  thereof,  unless  they  have  done  some  act 
which  has  divested  them  of  their  title,  or  which  has  estopped 
them  from  its  assertion. 

These  who  were  minors  could  not  be  estopped,  by  reason  of 
their  failure  to  give  notice  to  the  agents  of  the  county  that  they 
claimed  interests  in  the  property  while  the  county  buildings  were 
being  erected.  In  law  they  were  not  capable  of  estopping  them- 
selves simply  by  failing  to  assert  title.  The  county  being  the 
trustee,  is  presumed  through  its  agents  to  have  known  the  char- 
acter of  the  title,  and  the  record  shows  it  did  know,  as  the  order 
which  was  entered  of  record  by  the  county  commissioners,  author- 
ized Fletcher  to  convey  lots  one  and  two  in  block  fifty-two,  to 
Mrs.  Herrington,  upon  her  filing  with  him  a  sufficient  release  of  all 
her  interest,  or  such  as  the  heirs  of  Herrington  might  have  to 
lots  nine  ancl  ten  in  block  fifty-two,  and  the  order  states  that  it 
was  entered  at  the  request  of  Mrs.  Herrington.  By  this  order 
the  county  authorities  admit  that  the  heirs  had  an  interest  in  the 
lots  in  controversy,  and  requires  their  agent  to  extinguish  it 
before  he  conveyed  lots  one  and  two.  Thus  it  appears,  the  county 
authorities  acted  upon  full  information  that  the  heirs  had  an  in- 
terest in  these  lots,  when  they  erected  these  buildings,  nor  have 
they  shown  that  a  release  of  that  interest  was  ever  acquired  from 
the  heirs. 

It  is  urged  that  the  arbitration  was  inoperative,  as  Herring- 
ton  had  died  before  it  was  published  and  became  a  matter  of 
record.  We  do  not  conceive  that  it  was  material  that  it  should 
have  been  binding  on  the  parties  at  the  time,  as  by  long  acquies- 
cence it  has  acquired  such  force  that  the  parties  in  interest 
would  be  held  to  its  terms,  and  such  would  be  the  effect  of  a 
parol  agreement  after  such  an  acquiescence.  Moreover,  none  of 
the  parties  whose  interests  were  affected  by  it  are  now  complain- 
ing of  its  terms  or  provisions.  Nor  do  we  see  that  the  county 
has  any  right  to  question  the  validity  of  the  arbitration,  as  they 
had  previously  recognized  the  heirs  and  their  mother  as  having 
all  of  the  equitable  rights  that  existed  to  these  lots. 

Nor,  as  urged  by  counsel  for  appellant,  can  the  claim  be  re- 
garded as  stale.  Twenty  years  have  not  elapsed  since  all  the 
heirs  have  come  of  age,  and  unless  the  suit  would  have  been 
barred  had  the  action  been  at  law,  it  can  not  be  held  to  be  stale.  If, 


164       SUPERVISORS  OF  KANE  COUNTY  v.  HERRINGTON, 

however,  any  portion  of  the  heirs  were  of  age  when  the  county 
entered  into  possession,  and  twenty  years  have  elapsed  before 
this  suit  was  brought,  then  the  result  would  be  otherwise,  as  to 
such  heirs.  Where  the  Statute  of  Limitations  would  bar  an  action 
at  law,  and  the  matter  is  litigated  in  chancery,  the  latter  tribunal, 
following  the  analogies  of  the  law  in  such  cases,  would  hold  the 
claim  to  be  stale,  and  refuse  the  relief  sought. 

We  think  that  the  evidence  in  this  record  proves  that  the 
county  gave,  or  agreed  to  give,  lots  one  and  two  in  exchange  for 
lots  nine  and  ten,  and  all  of  the  complainants  who  were  of  age  at 
that  time  and  assented  to  the  arrangement,  are  estopped  from 
claiming  any  interest  in  this  property.  And  those  who  have 
dealt  with  lots  one  and  two  as  their  own,  or  as  belonging  to  the 
heirs,  are  likewise  estopped.  It  then  follows,  that  Mrs.  Herring- 
ton,  by  directing  these  lots  to  be  conveyed  to  James,  and  he  by 
receiving  the  conveyance  and  appropriating  them  to  his  own  use, 
were  estopped  from  claiming  any  right  to  the  lots  in  controversy. 

If  A.  M.  Herrington  was  of  age,  as  is  contended,  when  the 
lots  were  exchanged,  he  may  have  so  acted  as  to  be  estopped 
from  now  asserting  title.  We  have  seen  that  his  mother  acted 
with  the  property  as  though  she  held  the  equitable  title,  or  at 
least  as  though  she  was  the  agent  fully  empowered  by  the  heirs 
to  sell  and  dispose  of  the  property.  And  if  he  was  of  age,  know- 
ing that  his  mother  was  so  acting,  we  may  presume  these  acting 
for  the  county  believed  she  had  the  right  to  control  the  equity, 
and  that  by  the  exchange  the  county  were  uniting  the  equity 
with  the  fee,  which  it  held.  Having  reason  to  believe  that  the 
county  was  thus  acquiring  the  equity,  and  he  knowing  that  his 
mother  claimed  to  have  power  to  release  and  dispose  of  the  equity 
to  these  lots,  it  became  his  duty  to  assert  his  claim  and  thus  give 
notice  to  the  county  agents,  that  they  might  have  avoided  the 
large  outlay  incurred  in  these  improvements.  If  not  under  disa- 
bility, he  should  then  have  given  the  notice,  and  failing  to  do  so, 
it  would  be  inequitable  to  permit  him  now  to  assert  his  title. 
Had  the  county  taken  possession  without  the  arrangement  made 
with  Mrs.  Herrington,  it  would,  no  doubt,  have  been  otherwise. 

As  to  whether  A.  M.  Herrington  occupied  the  recorder's 
office  under  a  lease  from  the  county,  there  seems  to  be  a  conflict 
of  testimony.  He  swears  positively  that  he  did  not  lease  it  of  the 


IN  THE  SUPREME  COURT  OF  ILLINOIS.  165 

county,  and  his  brother  James  says  he  refused  to  lease  it,  but 
having  been  ordered  by  the  board  to  lease  it  to  his  brother,  on 
terms  named  in  the  order,  he  afterward  reported  that  he  had 
leased  it  as  required.  On  the  other  hand,  Vining  and  Brown, 
members  of  a  committee  appointed  by  the  Board  of  Supervisors 
to  confer  with  him,  say  that  he  offered  to  pay  thirty  dollars  per 
year  for  a  lease,  and  it  appears  that  it  was  upon  their  report  that 
the  order  for  the  lease  was  made.  But  conceding  that  he  did 
take  the  lease,  it  does  not  follow  he  would  be  estopped  to  assert 
his  equitable  title.  As  a  general  rule,  a  tenant  is  estopped  from 
questioning  his  landlord's  title,  when  sued  for  possession ;  but  to 
this  rule  there  are  some  exceptions — as  where  the  tenant  has 
been  evicted  by  a  paramount  outstanding  title,  and  has  attorned 
to  the  true  owner,  he  may,  when  sued  by  the  person  from  whom 
he  leased,  show  the  eviction  and  set  up  the  title  under  which  the 
eviction  was  had. 

In  such  a  case,  the  eviction  under  a  paramount  title  termi- 
nates the  former  relations  existing  between  them.  So,  if  the 
landlord  aliens  the  demised  premises  and  sues  the  tenant  in  eject- 
ment, the  tenant  may  defeat  a  recovery  by  showing  the  convey- 
ance. 

Again,  a  party  may  estop  himself  by  permitting  other  persons, 
with  his  knowledge  and  assent,  or  encouragement,  to  purchase 
property  which  he  owns,  and  thus  to  expend  their  money  without 
notice.  In  sucli  a  case,  it  is  held  to  be  a  fraud,  that  estops  him 
from  afterward  asserting  title.  In  taking  this  lease  there  was 
nothing  done  which  induced  the  county  to  expend  money  or  incur 
liability,  but  the  county  was  left  in  every  particular,  precisely  as 
it  was  before.  Had  the  county  erected  buildings  afterward,  or 
had  a  person  purchased  of  the  county  on  the  supposition  this  lease 
created  ownership  in.  the  county,  then  it  would  fall  within  the 
cases  referred  to  in  appellant's  brief  (a). 

Mrs.  Tuthill  and  husband  having  disclaimed  any  title  to  the 
premises,  it  follows  that  the  other  claimants  would  have  no  right 
to  her  share,  and  any  decree  giving  it  to  them  would  be  erroneous. 
Nor  can  the  other  complainants  claim  the  interests  of  those  who 
have  been  estopped  from  claiming  any  portion  of  these  lots. 

(a.)  See  as  to  estoppel,  Goodin  v.  Whitewater  Canal  Co.,  preceding,  page  121 ; 
and  note  thereto  appended,  page  130. 


I  £  $*-166  —  I']  J^  M'DONNELL  v.  WHITE, 


It  is  insisted,  that  all  of  the  heirs  having  died,  his  interest 
was  inherited  by  the  mother  and  brothers  and  sisters,  and  that 
Mrs.  Herrington,  if  entitled  to  any  interest  in  the  property,  was 
entitled  to  an  equitable  fee  in  the  share  of  that  child,  and  that  the 
decree  finds  no  such  interest.  If  we  understand  the  evidence 
correctly,  that  heir  died  soon  after  the  father,  and  before  the 
purchase  of  the  land,  and  if  so,  that  heir  had  no  interest  in  the 
land  at  the  time  of  his  death,  and  by  no  known  principle  of  law 
could  any.  subsequent  interest  be  vested  in  a  deceased  person. 

The  decree  of  the  court  below  is  reversed  and  the  cause 
remanded.  DECREE  REVERSED. 


JOHN  JM'DONNELL  v.  HENRY 

[This  case  was  decided  in  the  House  of  Lords,  in  1865,  Lord  Chancellor 
WESTBURY  delivering  the  opinion,  and  Lords  CRANWORTH  and  CHELMS- 
FORD  concurring.  Reported  in  u  House  of  Lords  Cases,  570.] 

Though  the  rule  as  to  limitation  by  time  does  not  apply  in  the  case  of  express 
trusts,  yet,  as  to  them,  in  equity  the  general  rule  is,  that  stale  demands  are 
not  to  be  encouraged. 

In  taking  accounts  against  a  trustee,  when  he  is  to  be  fixed  with  a  personal  lia- 
bility, his  good  faith  is  to  be  considered,  and  every  fair  allowance  is  to  be 
made  in  his  favor,  especially  if  the  demand  against  him  is  one  which  arose 
many  years  ago,  and  the  beneficiary  was  at  the  time  cognisant  of  all  the  mat- 
ters connected  with  it. 

A,  being  greatly  in  debt,  executed  a  deed  of  trust  for  the  benefit  of  creditors,  and 
among  the  property  assigned  under  the  trust  deed  was  a  lease  for  lives  re- 
newable forever,  on  which  the  rent  reserved  was  really  a  high  rack-rent; 
the  tenant  complained,  and  the  trustee,  with  the  knowledge  of  A,  though 
without  his  consent,  but  with  the  full  assent  of  A's  brother,  to  whom  A  had 
committed  the  management  of  his  affairs,  received  from  the  tenant  an  abated 
rent;  A  complained  of  the  abatement,  but  he  took  no  steps  to  put  an  end  to 
it.  Held,  that  the  estate  of  the  trustee  could  not,  after  the  expiration  of  the 
trust,  be  called  upon  to  make  up  the  deficiency. 

While  the  trust  was  in  existence,  A,  who  had  been  absent  from  the  country,  re- 
turned, was  informed  of  all  that  had  occurred,  and  made  an  affidavit  in  a  suit 
then  pending,  which  had  been  instituted  by  one  of  his  creditors.  In  this  suit 
a  receiver  was  appointed  over  one  of  the  estates  included  in  the  trust.  Held, 
that  from  the  date  of  this  appointment  the  power  of  the  trustee  was  at  an  end, 
and  that,  as  by  the  law  of  Ireland,  the  receiver's  duty  related  as  well  to  the 
arrears  then  due  from  the  tenants  of  that  estate  as  to  those  which  afterward 
would  become  due,  and  consequently,  no  steps  having  been  taken  to  enforce 


IN  THE  HOUSE  OF  LORDS.  167 

payment  from  the  trustee  of  arrears  which,  before  the  appointment  of  the 
receiver,  he  had  suffered  to  accrue,  his  estate  could  not,  after  the  lapse  of 
many  years,  be  made  liable  for  those  arrears. 

THE  Attorney-General,  Sir  13.  Palmer,  and  the  Solicitor-Gen- 
eral for  Ireland,  Mr.  E.  Sullivan,  for  M'Donnell.  Mr.  Isaac 
Butt,  of  the  Irish  bar,  and  Sir  H.  Cairns,  for  Mr.  White. 

The  Lord  Chancellor,  Lord  WESTBUEY  :  My  Lords,  this  ap- 
peal is  presented  in  a  suit  which  was  instituted  by  the  late  Sir 
Joseph  Hoare,  in  the  Court  of  Chancery,  in  Ireland,  in  the  year 
1841,  for  the  purpose  of  taking  the  accounts  of  a  trustee  named 
Maziere,  long  since  dead,  which  accounts  were  to  be  taken  as  to 
certain  estates  comprised  in  a  trust  deed  for  the  benefit  of  cred- 
itors, executed  by  Sir  Joseph  Hoare  in  the  month  of  September, 
1816,  and  of  which  Mr.  Maziere  was  the  trustee. 

This  trust  was  for  a  term  of  twenty-one  years,  and  after  pay- 
ment of  the  creditors,  the  ultimate  trust  was  for  the  benefit  of  Sir 
Joseph  Hoare.  It  expired,  therefore,  in  the  year  1837,  Mr. 
Maziere  dying  shortly  afterward.  The  suit  was  not  instituted 
until  the  year  1841,  four  years  after  the  death  of  the  trustee. 
When  instituted,  it  was  very  far  from  being  rapidly  prosecuted. 
A  decree  was  made  by  the  Court  of  Chancery,  in  Ireland,  in  the 
month  of  May,  1847,  but  little  or  nothing  was  done  under  that 
decree.  In  the  month  of  November,  1852,  Sir  Joseph  Hoare 
died.  The  suit  Avas  afterward  revived  by  his  representative, 
the  present  appellant ;  and  the  account  taken  against  the  repre- 
sentative of  the  trustee  was  not,  in  fact,  taken  until  the  years 
1856  and  1857. 

It  is  important,  in  the  first  place,  to  observe  that  although  it 
is  perfectly  true  that  no  time  runs  as  between  the  cestui  que  trust 
or  beneficiary  and  the  trustee,  upon  an  express  trust,  so  as  to  bar 
the  remedy  of  the  beneficiary,  yet  with  respect  to  claims  made 
by  him  against  a  trustee,  the  general  rule  of  equity  that  encour- 
agement is  not  to  be  given  to  stale  demands,  is  equally  applicable. 
And  in  taking  an  account  for  the  purpose  of  charging  the  trustee 
with  personal  liability  (which  is  the  object  of  the  present  suit), 
every  fair  allowance  ought  to  be  made  in  favor  of  the  trustee,  if 
it  can  be  shown  that  the  claim  which  is  now  sought  to  be  enforced 
is  one  which  arose  many  years  ago,  and  one  of  the  nature  and 


108  M'DONNELL  ».  WHITE, 

particulars  of  which  the  beneficiary  was  at  the  time  when  it  arose 
perfectly  cognizant. 

Now,  that  observation  will  be  found  applicable  to  the  whole 
of  the  subjects  of  the  present  complaint.  The  first  and  principal 
object  of  the  appeal  on  the  part  of  M'Donnell,  was  to  charge  the 
trustee,  Mr.  Maziere,  with  certain  sums  of  money  which  constir 
tuted  an  abatement  allowed  by  him  to  one  of  the  tenants  by  the 
name  of  Wise,  from  his  rent,  and  which  abatement  began  to  be 
made  as  early  as  the  year  1823.  It  appears  that  Sir  Joseph 
Hoare  had  granted  a  lease  for  nine  thousand  years  (equivalent  to 
a  perpetuity)  of  certain  estate  in  Ireland,  to  a  person  of  the  name 
of  Wise,  reserving  a  payment,  which  in  reality  was  in  the  nature 
of  a  fee  farm  rent,  but  which  rent,  contrary  to  the  practice  of  a 
fee  farm  rent,  was  very  nearly  equal,  if  not  quite  equal,  to  the 
rack  rent  of  the  land.  Difficulties  were  experienced  by  the  trus- 
tee in  recovering  the  amount  of  this  rent  from  Mr."  Wise,  and  in 
the  year  1823,  the  trustee  made  an  abatement  to  Mr.  Wise,  of 
forty  guineas  per  annum  out  of  his  rent,  and  in  so  doing,  he 
acted  with  the  knowledge  of  Sir  Joseph  Hoare,  to  whom  the  fact 
was  immediately  communicated ;  and  he  acted  also  with  the  en- 
tire approbation  of  Captain  Hoare,  a  relative  of  Sir  Joseph,  to 
whom  Sir  Joseph  Hoare  had,  on  his  leaving  Ireland,  committed 
(as  is  proved  by  his  own  letters)  the  entire  management  and 
superintendence  of  the  estates  in  the  hands  of  the  trustee.  These 
facts  are  put  beyond  possibility  of  doubt  by  the  correspondence. 
It  appears  that  the  circumstances  were  fully  stated  by  the  trus- 
tee, Mr.  Maziere,  to  Sir  Joseph  Hoare.  The  fact  that  Sir  Joseph 
Hoare  had  committed  the  superintendence  of  the  estate  to  Cap- 
tain Hoare  is  proved  by  the  correspondence.  It  is  also  clearly 
proved,  that  Sir  Joseph  Hoare  was  aware  that  Captain  Hoare 
and  the  trustee  had  concurred  in  the  propriety  of  making  this 
abatement,  and  it  is  clear  that  Sir  Joseph  Hoare,  although  he 
certainly  grumbled  at  what  had  been  done,  did  not  attempt,  by 
any  means,  by  any  legal  proceeding  or  otherwise,  to  question  the 
legality  or  the  propriety  of  what  had  been  done' by  the  trustee. 

The  Lord  Chancellor  of  Ireland  refused,  under  these  circum- 
stances, to  charge  Mr.  Maziere's  estate  with  the  amount  of  this 
abatement,  Which  was  sought  to  be  charged  against  it  upon  the 
ground  that  he  had  no  right  to  make  the  abatement,  and  that 


IN  THE  HOUSE  OF  LORDS.  169 

the  sum  so  abated  might  have  been  recovered  if  due  diligence 
had  been  used.  Having  regard  to  the  facts  proved,  and  to  the 
silence  of  Sir  Joseph  Hoare  upon  the  subject,  I  think  the  fair 
inference  will  be  that  it  was  a  prudent  abatement,  and  one 
therefore  that  does  not  at  all  form  a  proper  subject  of  complaint 
against  the  trustee.  But  besides  that,  I  think  it  clear  that  it 
was  done  under  the  authority  that  Sir  Joseph  had  committed  to 
Captain  Hoare.  It  would  be  infinitely  too  much  for  Sir  Joseph's 
representatives  to  attempt  now,  to  deny  that  authority  which  was 
admitted  by  Sir  Joseph  himself,  and  that  in  the  act  so  done  by 
his  agent  Sir  Joseph  Hoare  virtually  acquiesced,  inasmuch  as 
no  proceeding  was  taken  to  deny  the  validity  of  what  had  been 
done  until  the  institution  of  this  suit  in  May,  1841,  about  eight- 
een years  after  the  transaction  had  occurred.  I  think,  my 
Lords,  upon  these  two  grounds  you  will  have  no  difficulty  in 
concurring  with  the  Lord  Chancellor  of  Ireland,  and  in  affirming 
his  refusal  to  charge  the  trustee  with  this  abatement  as  an  act 
of  willful  default  (a). 

(a)  "  In  the  case  of  a  stale  claim,  barred  by  lapse  of  time,  by  gross  laches, 
and  long  unexplained  acquiescence  in  the  operation  of  the  adverse  right,  courts 
of  equity  will  often  treat  the  lapse  of  a  period  less  than  the  one  specified  in  the 
statute  of  limitations  as  a  presumptive  bar  to  the  claim.:1  "If  the  complainant 
seeks  to  avoid  the  effects  of  the  lapse  of  time,  on  the  ground  of  concealed  fraud, 
he  must  set  forth,  with  particularity,  when  and  by  what  means  the  fraud  was 
discovered,  and  the  averments  so  made  must  be  supported  by  the  proofs,"'  Badger 
v.  Badger,  2  Clifford's  Reports  of  District  Court  U.  States  (1862),  137. 

Walmsley  v.  Booth,  2  Atk.  25:  In  1739,  Lord  HAKDWICKE  decided  that  six 
years'  acquiescence  by  a  decease/1  party,  in  a  bond  given  to  his  attorney,  was 
sufficient  to  bind  a  suit  by  the  executor  after  the  death  of  the  testator.  In  1741 
he  reconsidered  the  same  case,  and  reversed  his  former  decision,  holding  the  ac- 
quiescence not  sufficient. 

Alloway  v.  Braine,  26  Beavan  575,  (1859) :  Ten  and  a  half  years'  acquies- 
cence held  to  bind  a  party  who  had  bargained  for  property  afterward  sold,  with 
notice,  to  another. 

The  trustee  was  also  the  cestui  que  trust,  and  although  for  eight  years  he  acqui- 
esced in  a  loss  of  the  trust  estate,  he  afterward  held  the  representatives  of  the 
trustee  responsible,  and  recovered  in  the  action,  Butler  v.  Carter,  5  Eng.  Ch. 
Cases,  276. 

Merriweather  v.  Lewis,  9  B.  Mon.  179:  Marginal  note  sustained  by  the  text: 
"Admissions  in pais  are  not  conclusive,  except  where  third  persons  have  acted  upon 
them.  They  can  not  be  denied,  in  such  cases,  to  the  prejudice  of  third  persons." 

"If  a  party  having  an  interest  in  preventing  an  act  being  done,  acquiesces 
in  it  so  as  to  induce  a  reasonable  belief  that  he  consents  to  it,  and  the  position  of 
others  is  altered  by  their  giving  credit  to  his  sincerity,  he  has  no  right  to  challenge 


170  M'DONNELL  t>.  WHITE, 

I  pass  on  now  to  the  consideration  of  the  subject  of  the  cross- 
appeal,  for  unfortunately  the  decree  made  by  the  Lord  Chancel- 
lor of  Ireland  in  this  case  has  been  the  subject  of  two  appeals. 
The  subject  of  the  cross-appeal  arises  in  this  way:  There  were 
certain  lands  in  the  western  part  of  the  county  of  Cork,  called 
Naskin  and  Dromerk,  included  in  the  trusts  of  this  estate.  They 
were  also  subject,  in  respect  of  the  interest  of  Sir  Joseph  Hoare, 
to  the  claims  of  other  creditors  of  Sir  Joseph,  who  had  not  Be- 
come parties  to  the  trust  deed.  One  of  these  creditors  was  a 
gentleman  of  the  name  of  Oakley,  and  he  appears  in  the  year 
1823  to  have  instituted  a  suit  in  Ireland, — that  being  a  creditor's 
suit  against  Sir  Joseph  Hoare,  as  also  against  Peter  Maziere, 
for  the  purpose  of  obtaining  payment  of  his  debt,  and  the  debts 
of  other  creditors  similarly  circumstanced.  In  the  present  suit 
of  Hoare  v.  White,  now  M'Donnell  and  White,  the  representa- 
tives of  Sir  Joseph  Hoare  have  brought  against  Mr.  Maziere  a 
charge  of  willful  default  in  respect  of  these  two  estates  of  Nas- 
kin and  Dromerk,  and  the  allegation  was  that  rents  had  become 
due  for  three  or  four  years  anterior  to  the  month  of  November, 
1823,  which  rents  had  not  been  recovered  by  Mr.  Maziere,  but 

the  act  to  their  prejudice,"  Stone  v.    Wertz,  3  Bush's  Ky.  490,  citing  2  Story's 
Eq.  Juris.  756. 

Duke  of  Leeds  Y.  Amherst,  2  Phillips,  116,  22  Eng.  Ch..  S.  C.:  The  statute  rule 
which  gives  a  remainder-man  twenty  years,  from  the  time  his  title  accrues  in 
possession,  for  bringing  an  action  or  suit  for  the  property,  applies  to  a  claim  for 
compensation  for  equitable  waste  as  well  as  to  a  claim  for  the  land  itself;  and 
therefore,  an  account  for  equitable  waste  was  decreed  against  the  estate  of  the 
tenant  for  life  thirty-eight  years  after  the  waste  was  committed,  the  title  of  the 
plaintiff,  as  remainder-man,  having  accrued  within  twenty  years  before  the  filing 
of  the  bill.  By  Lord  Chancellor  COTTENHAM,  p.  122,  acquiescence  is  defined  to 
be:  "If  a  party,  having  a  right,  stands  by  and  sees  another  dealing  with  the 
property  in  a  manner  inconsistent  with  that  right,  and  makes  no  objection  while 
the  net  is  in  progress,  he  can  not  afterward  complain."  Held,  no  acquiescence, 
because  the  party  was  a  minor  at  the  time  the  acts  took  place.  Therefore,  "re- 
lease, or  abandonment  of  the  party's  right,"  was  relied  upon.  This  was  a  sou  suing 
the  father's  estate,  and  it  appeared  some  negotiations  were  had  in  which  this 
waste  in  controversy  was  put  forward  as  a  matter  for  settlement.  Per  curia:  "If 
that  negotiation  had  been  carried  forward  to  a  conclusion,  and  there  had  been 
any  arrangement  of  property  consequent  upon  it,  the  circumstance  of  the  plaint- 
iffs concluding  it  without  bringing  forward  the  claim,  might  be  urged  as  a  release 
of  it.  But  the  negotiation  ended  in  nothing,  and  can  not  be  held  as  an  abandon- 
ing'or  releasing  the  claim/'  In  this  case,  there  was  evidence  going  to  show  that 
the  waste  complained  of  was  beneficial  to  the  estate. 


IN  THE  HOUSE  OF  LORDS.  171 

might  have  been  recovered  by  him  if  due  diligence  had  been 
used.  And  accordingly  it  Avas  sought,  in  the  present  suit,  to 
charge  Mr.  Maziere's  estate  as  for  his  willful  default,  to  the 
extent  of  the  rents  of  those  lands  not  so  recovered. 

Independently  of  an  objection  which  I  shall  presently  notice, 
it  certainly  does  appear  from  the  correspondence,  that  Sir  Joseph 
Hoare  was  perfectly  aware  that  lenity  and  forbearance  had  been 
used  by  the  trustee  with  regard  to  the  tenants  of  those  estates, 
and  in  one  of  the  letters  of  Sir  Joseph  Hoare,  Avritten  at  the 
beginning  of  the  year  1823,  and  before  the  contemplated  visit  of 
Sir  Joseph  to  Ireland,  he  particularly  desires  that  the  agent  em- 
ployed by  the  trustees  should  act  as  gently  as  possible  with  re- 
gard to  the  rents  of  those  western  tenants,  which  would  include, 
of  course,  those  estates  of  Naskin  and  Dromerk. 

It  would  be  very  difficult,  therefore,  I  should  submit  to  your 
Lordships,  in  the  face  of  that  express  desire,  and  after  this  long 
lapse  of  time,  to  come  now  to  the  conclusion  that  you  are  at 
present  so  perfectly  well  informed  of  the  facts  as  to  be  able  to 
pronounce  with  satisfaction  and  confidence,  that  the  circum- 
stances of  the  country,  or  the  condition  of  the  estates  or  of  the 
tenantry,  did  not  warrant  the  forbearance  that  was  exercised  by 
the  trustee.  But  fortunately  it  is  not  necessary  that  your  Lord- 
ships should  found  your  opinion  merely  upon  that  consideration, 
because  it  appears  that  in  that  suit  to  which  I  have  already 
adverted,  of  Oaldey  v.  Hoare,  which  embraced  this  matter,  an 
application  was  made  for  a  receiver  in  the  month  of  November, 
1823.  That  application  appears  to  have  been,  at  all  events, 
acquiesced  in,  if  not  promoted  by,  Sir  Joseph  Hoare  himself, 
and  he  made  an  affidavit  on  that  occasion,  in  the  month  of  No- 
vember, 1823,  in  which  he  specifies  these  arrears  as  being  then 
due  from  his  tenants,  which  arrears  his  representative  now  seeks 
to  convert  into  the  subject  of  a  charge  of  willful  default  on  the 
part  of  the  trustee.  In  pursuance  of  that  affidavit,  an  order  for 
a  receiver  was  made  in  the  suit  of  Oakley  v.  Hoare,  and  in  con- 
formity with  the  settled  law  of  the  Irish  Court  of  Chancery,  the 
duty  of  the  receiver  had  reference  not  only  to  the  future  rents, 
but  also  to  all  the  past  arrears  of  the  rent.  In  effect,  therefore, 
the  order  appointing  the  receiver  in  Oaldey  v.  Hoare  took  away 
from  the  trustee  of  Sir  Joseph  Hoare,  under  the  deed  of  1816, 


/  (0  (ft  "172  MCDONNELL  v.  WHITE. 

all  further  control  over  those  arrears,  and  all  power  of  collecting 
them ;  and  that  was  done  with  the  acquiescence  of  Sir  Joseph 
Hoare.  It  was  equivalent,  therefore,  to  Sir  Joseph  Hoare  him- 
self having  transferred  the  enforcement  of  those  very  arrears 
from  the  trustee,  of  whose  contract  he  complains,  to  another 
person ;  and  the  trustee  consequently  can-  not  be  held  charge- 
able, seeing  that  the  arrears  were  treated  as  rents  that  were  to 
become  payable,  and  seeing  that  those  rents  were  ta  be  made 
the  subject  of  this  transfer  of  ownership  from  the  trustee,  Mr. 
Maziere,  to  the  receiver  appointed  in  Oaldcy  v.  Hoare. 

It  appears,  however,  from  the  transactions  in  Oaldey  v.  Hoare, 
that  the  receiver  was  no  more  able  to  recover  the  rents  than  Mr. 
Maziere  had  been.  But  that  is  a  subject  into  which  your  Lord- 
ships need  not  enter,  as  it  is  sufficient  for  the  present  purpose  to 
see  that  it  is  impossible  to  arrive  at  the  conclusion  that  these 
rents  might  have  been  and  .ought  to  have  been  collected  by  the 
trustee  anterior  to  the  order  appointing  the  receiver.  And  even 
if  it  had  been  possible  to  arrive  at  that  conclusion,  it  would  be 
impossible  to  follow  that  conclusion  to  its  consequences  at  the 
present  time,  in  the  face  of  the  order  by  which  the  arrears  were 
transferred,  in  the  manner  I  have  mentioned,  from  the  trustee, 
Mr.  Maziere,  to  the  receiver  appointed  in  the  suit  of  Oakley  v. 
Hoare.  But  I  submit  to  your  Lordships  that,  in  the  court  be- 
low, these  considerations  were  not  properly  attended  to,  and  that 
there  was  a  miscarriage  therefore,  in  charging  the  trustee  with 
the  rents  of  those  estates  which  were  due  at  the  time  when  the 
order  for  the  receiver  was  made,  and  that  no  such  charge  ought 
to  have  been  either  allowed  by  the  Master  or  confirmed  by  the 
Lord  Chancellor.  In  that  particular,  therefore,  I  should  advise 
your  Lordships  to  reverse  the  order  that  has  been  made,  and  to 
strike  out  of  the  charge  against  the  trustee  the  sum  of  money 
that  has  been  carried  to  his  debit  by  reason  of  this  imputation 
of  willful  default  in  respect  of  the  arrears  of  rent  upon  those  two 
denominations  of  land,  anterior  to  the  month  of  November,  1823. 

[The  remaining  parts  of  the  opinion  of  the  Lord  Chancellor 
relate  to  interest,  and  the  division  of  the  costs  in  the  suit,  and 
are  not  of  sufficient  importance  to  be  inserted  here.] 


LONGEST  v.  TYLER.  173  _ 


LONGEST'S  ADMINISTRATOR  v.  TYLER'S  EXECUTOR. 

\This  case  was  decided  at  the  Summer  term,  1864,  of  the  Court  of 
Appeals  of  Kentucky,  Justice  GEORGE  ROBERTSON  delivering  the  opinion. 
Reported  in  I  Duvall,  192.] 

APPEAL  FROM  LOUISVILLE  CHANCERY  COURT. 

An  executor  brought  suit  in  equity  to  subject  the  land  of  a  debtor  of  the  testator 
to  the  payment  of  the  debt.  Pending  that  suit,  the  land  was  sold  under  a 
decree  in  favor  of  the  debtor's  vendor  for  a  balance  of  the  purchase-money, 
and  the  executor  bought  it.  He  afterward  sold  and  conveyed  the  land  to  a 
stranger,  for  more  than  enough  to  reimburse  what  he  had  paid  for  it,  and 
to  satisfy  the  debt  due  his  testator.  Held,  that  he  was  bound  so  to  apply 
the  proceeds,  but  was  not  bound  for  the  surplus. 

The  doctrine  of  constructive  fraud  operates  to  prevent  infidelity  or  spoliation  in 
a  class  of  cases  embracing  executors  and  other  trustees,  in  which  there  may 
be  temptations  and  facilities  to  rapacity. 

It  is  the  duty  of  trustees  to  guard,  in  good  faith,  the  interests  of  their  beneficia- 
ries, and  never  to  speculate  on  them,  or  through  means  afforded  by  them. 

Speed  &  Smith,  for  appellant.  G.  A.  &  J.  Caldwell,  for 
appellee. 

JUDGE  ROBERTSON  delivered  the  opinion  of  the  Court.  Levi 
Tyler,  who  was  executor  of  C.  Longest,  deceased,  and  testamentary 
guardian  of  his  infant  son  and  only  devisee  (R.  C.  Longest),  ob- 
tained, as  executor,  two  judgments  against  S.  K.  Page,  for  an  ag- 
gregate amount  exceeding  $2,000.  Executions  on  these  judgments 
having  been  returned  no  property  found,  he  filed  a  bill  in  the 
Louisville  Chancery  Court  for  subjecting  to  the  satisfaction  of 
that  entire  debt,  Page's  undivided  moiety  of  1,200  acres  of  land, 
in  Hopkins  County,  Kentucky,  to  which  Page  was  entitled  jointly 
with  one  Ayres.  Ayres  and  Page  had  purchased  the  land  from 
Coleman,  whom  Page  still  owed  a  balance  of  about  f  2,500  of  the 
price.  During  the  pendency  of  Tyler's  bill  a  partition  between 
the  joint  owners  allotted  to  Page  613  acres,  and  Coleman  ob- 
tained a  decree  for  selling  that  allotment  for  satisfying  his  unpaid 
balance.  Tyler  attended  the  sale,  and  bought  595  acres  for 
Coleman's  debt,  then  amounting  to  $2,595.70;  and  afterward, 
the  chancellor  having,  on  Tyler's  said  bill,  ordered  a  sale  of  the 


174  LONGEST  v.  TYLER, 


residual,  18  acres,  in  part  satisfaction  of  Page's  debt  to  Longest, 
Tyler  bought  that  portion  also,  at  the  price  of  $40 — thus  buy- 
ing the  whole  613  acres  for  the  sum  of  $2,595.70,  in  1847-8. 
In  1852  he  resold  part  of  the  land  for  §5,777,  and,  in  1856, 
sold  the  residue  for  $1,625,  making  the  entire  proceeds  of  sale 
$7,202. 

In  1858,  R.  C.  Woolfolk,  administrator  of  the  said  R.  C. 
Longest,  who,  in  the  mean  time,  had  attained  majority  and  died 
intestate,  brought  this  suit  in  the  Louisville  Chancery  Court, 
asserting  an  equitable  right  to  the  profits  made  by  Tyler  by  the 
purchases  and  sales  aforesaid.  Tyler,  in  his  answer,  resisted 
the  claim,  and  asserted  that  he  had,  in  good  faith,  bought  the 
land  for  his  own  benefit,  and  therefore  had  appropriated  no  por- 
tion of  the  proceeds  of  said  land  to  the  use  of  R.  C.  Longest  on 
account  of  the  judgments  against  Page. 

The  chancellor  adjudged  to  H.  C.  Longest' s  -Administrator 
v.  Guthric,  as  Tyler's  administrator,  the  amount  due  on  the 
judgments  Tyler,  as  executor  of  C.  Longest,  had  obtained 
against  Page;  the  whole  of  which  still  remains,  although  Tyler 
said  to  two  witnesses,  in  1852,  that  he  had  then  saved  that 
debt. 

From  that  judgment  each  party  has  appealed. 

In  revising  the  case,  we  shall  consider  only  one  question 
involving  the  nature  and  extent  of  the  trust  under  which  Tyler 
bought  the  land. 

To  prevent  infidelity  or  spoliation  in  a  certain  class  of  cases 
embracing  executors  and  other  trustees,  in  which  there  may  be 
peculiar  temptations  and  facilities  to  rapacity,  and  peculiar  dif- 
ficulty in  detecting  the  wrong,  the  law  has  prudently  established 
a  jealous  and  preventive  doctrine  of  constructive  fraud.  This 
provident  doctrine  may  be  sufficiently  illustrated  for  this  case  by 
the  following  examples  : 

1.  If  an  executor  or  other  trustee,  at  a  sale  of  any  of  the 
trust  property,  buy  it,  the  beneficiary  shall  have  the  election 
to  hold  him  to  the  purchase,  or  to  disregard  it  and  claim  res- 
titution of  the  thing  sold  or  payment  of  its  full  value. 

2.  All  profit  made  by  a  trustee  by  the  use  of  any  trust  prop- 
erty belongs  to  the  beneficiary. 

3.  If  an  executor  or  other  trustee  pays  debts  with  less  than 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  175 

the  nominal  amount,  he  is  entitled  to  reimbursement  of  what  he 
paid  only. 

4.  If   a   trustee   buy   an   incumbrance   on  the  beneficiary's 
property,  although  he  shall  have  paid  his  own  money,  he  holds 
it  to  the  use  of  the  beneficiary  at  what  he  gave  for  it. 

5.  It  is  the  duty  of  trustees  to  guard  in  good  faith  the  in- 
terests of  their  beneficiaries,  and  never  to  speculate  on  them  or 
through  any  means  afforded  by  them  (a). 

A  proper  application  of  the  comprehensive  and  conservative 
principle  thus  partially  illustrated,  will  decide  this  case. 

The  pendency  of  the  suit  in  rem  against  Page's  land,  oper- 
ated as  a  lien  thereon  in  favor  of  the  complainant  Tyler,  as 
executor  of  C.  Longest.  As  the  land  was  unquestionably  more 
than  sufficient  for  paying  Page's  debt  to  Longest,  Tyler,  even 
had  there  been  no  prior  encumbrance,  could  not  have  defeated 
full  payment,  by  buying  the  land  for  himself,  at  a  price  less  than 
the  amount  secured  byHhe  executorial  lien,  but  would  have  held 
the  land,  so  bought,  still  subject  to  that  lien,  or  in  trust  for  the 
deficit.  The  intervention  of  Coleman's  prior  lien  did  not  change 
the  equitable  character  or  effect  of  his  purchase.  His  extin- 
guishment of  that  lien  inured  to  the  advantage  of  his  lien  as 
executor,  but  did  not  discharge  that  lien,  and  he  still  held  the 
land  subject  to  it,  so  far  as  the  value  of  the  land  exceeded  the 

(a)  Trustees  buying  in  claims  against  the  trust  estate,  can  hold  them  only 
as  security  for  the  amounts  paid,  with  interest,  'Quackenboss  v.  Leonard,  9  Paige, 
344,  citing  Lewen  on  Trusts,  289. 

Green  v.  White.  1  Johns.  Ch.  27,  p.  37:  The  principle  is  the  same  as  to  buying 
in  the  trust  estate,  or  buying  securities  upon  it. 

A  trustee  can  not  act  for  his  own  benefit  in  a  contract  on  the  subject  of  the 
trust,  Alorrett  v.  Parker,  2  Atk.  62. 

A  trustee  is  not  permitted  to  use  the  information  he  gains  as  trustee,  by 
purchasing  in  for  himself,  3  Atk.  37;  3  P.  Williams,  249,  note  a. 

Hawley  v.  Mancius,  1  Johns.  Ch.  189:  "A  trustee  purchased  in  a  judgment 
against  the  estate  with  his  own  funds.  Held,  that  it  must  be  satisfied,  to  the 
extent  of  the  money  paid,  out  of  the  trust  fund,  and  not  otherwise.'' 

"It  is  a  general  principle  that  if  a  trustee,  etc.,  gets  an  advantage  by  being 
in  possession,  or  behind  the  back  of  the  party  interested,  and  purchases  in  an 
outstanding  title,  or  incumbrance,  he  shall  not  use  it  to  his  own  benefit,  and  the 
annoyance  of  him  under  whose  title  he  entered,  but  will  be  considered  as  hold- 
ing in  trust,"  Morgan's  Heirs  v.  Boones  Heirs,  4  Mon.  297. 

A  trustee  is  not  permitted  by  law  to  do  any  thing  to  the  prejudice  of  the 
cestui  que  trust,  or  to  acquire  title  to  the  trust  estate  in  his  individual  character, 
to  the  injury  of  the  trust,  Morrison  v.  Caldwell,  5  Mon.  435. 


•*  176  LONGEST  v.  TYLER. 


amount  paid  for  removing  Coleman's  encumbrance.  To  that 
extent  his  own  personal  interest  and  his  fiducial  duty  and  inter- 
est were  conflicting ;  and,  therefore,  his  purchase  must,  to  the 
same  extent,  be  deemed  a  trust.  This  has  been  adjudged  in  the 
analagous  case  of  Van  Epps  v.  Van  Epps,  9  Paige's  New  York 
Ch.  237.  In  that  case  a  trustee,  in  a  junior  mortgage,  pur- 
chased for  his  own  benefit  and  with  his  own  money,  at  a  de- 
cretal sale  for  satisfying  the  prior  mortgage,  and  the  chancellor 
decided  that  he  held  the  property  in  trust  for  his  beneficiary's 
claim  under  the  junior  mortgage,  subject  to  a  lien  for  what  he 
had  paid  to  extinguish  the  elder  mortgage  (a). 

According  to  the  principle  as  thus  recognized  and  illustrated, 
Tyler,  having  sold  and  conveyed  the  land  to  strangers,  had  a 
right  to  retain  of  the  proceeds  as  much  as  he  paid ;  and  then, 
as  he  sold  it  for  a  sum  which  would  satisfy  both  liens  and  leave 
a  large  surplus,  it  was  his  duty  to  pay,  or  account  for  as  paid, 
his  judgments  against  Page.  And  we  can  see  no  consistent 
reason  why  the  implied  trust  should  be  extended  any  further,  or 
why,  consequently,  he  should  be  held  liable  to  his  beneficiary 
for  a  surplus  profit  made  by  his  own  skill  and  with  his  own  cap- 
ital, and  whereby  he  secured  the  trust  debt.  This  was  the  judg- 
ment of  the  chancellor.  We  concur  in  its  justice  ;  and,  therefore, 
it  is  hereby  affirmed,  and  the  cross-appeal  dismissed. 

(a)  In  Van  Epps  v.  Van  Epps,  9  Paige's  Ch.  241,  Chancellor  WALWORTH  says: 
"The  defendant  is  also  wrong  in  supposing  that  he  was  authorized  to  become  the 
purchaser  of  the  Greenbush  farm,  under  the  master's  sale  upon  the  prior  mort- 
gage, for  his  own  exclusive  benefit,  to  the  prejudice  of  the  subsequent  mortgage 
which  he  held  in  trust  for  others.  The  rule  of  equity  which  prohibits  purchases 
by  parties  placed  in  a  situation  of  trust  or  confidence  with  reference  to  the  sub- 
ject of  purchase,  is  not,  as  the  defendant  supposes,  confined  to  trustees  or  others 
who  hold  the  legal  title  to  the  property  to  be  sold;  nor  is  it  confined  to  a  partic- 
ular cl;tss  of  persons,  such  as  guardians,  trustees,  or  solicitors.  But  it  is  a  rule 
which  applies  universally  to  all  who  come  within  its  principle;  which  principle 
is,  that  no  party  can  be  permitted  to  purchase  an  interest  in  property  and  hold 
it  for  his  own  benefit,  where  he  has  a  duty  to  perform  in  relation  to  such  prop- 
erty which  is  inconsistent  with  the  character  of  a  purchase  on  his  own  account 
and  for  his  individual  use."  The  cases  on  this  subject  are  nearly  all  referred  to 
in  Hawley  v.  Cramer,  4  Cowen,  717,  and  in  the  then  recent  case  of  Greenlaw  v. 
King,  decided  by  Lord  COTTENHAM,  6  London  Jurist,  18. 

For  an  enumeration  of  some  of  the  relations  to  which  the  rules  governing 
trustees  and  trusts  apply,  see  note  to  Michoud  v.  Qerod,  preceding,  pnge  48. 


FAUCETT  v.  FAUCETT.  1 7  7 


FAUCETT  v.  FAUCETT. 

[This  case  was  decided  at  the  Winter  term,  1866,  of  the  Court  of  Ap- 
peals of  Kentucky,  Chief  Justice  BELVARD  E.  PETERS  delivering  the 
opinion.  Reported  in  i  Bush,  511.] 

APPEAL  FROM  TAYLOR  CIRCUIT  COURT. 

A  purchase  made  by  a  trustee  or  guardian  of  the  trust  property,  or  by  an  execu- 
tor of  the  estate  of  his  testator,  from  himself,  during  the  continuance  of  the 
fiduciary  character  of  the  purchaser,  will  not  be  sanctioned  or  allowed  to  pre- 
vail, unless  it  be  made  under  the  authority  of  the  court  and  consent  of  the 
persons  beneficially  entitled  to  the  property,  who  are  competent  to  consent, 
and  even  then  it  will  be  regarded  with  suspicion.  Such  a  purchase,  however 
fair  in  itself,  is  voidable  at  the  option  of  the  cestui  que  trust.  Nor  is  it  neces- 
sary to  show  that  the  trustee  has  made  any  profit  or  obtained  any  advantage 
by  his  purchase;  but  it  will  be  supported  if  found  to  be  beneficial  tp  the  trust 
estate. 

A  trustee  or  executor  will  not  be  permitted  to  create  in  himself  an  interest  oppo- 
site to  that  of  the  party  for  whom  he  acts,  nor  to  traffic  in  the  estate  for  his 
own  emolument.  This  principle  applies  also  to  administrators. 

W.  Howell,  for  appellant.' 

CHIEF  JUSTICE  PETERS  delivered  the  opinion  of  the  Court : 

Robert  Faucett  devised  the  principal  part  of  his  estate,  con- 
sisting of  land  and  slaves,  to  his  wife,  "  during  her  natural  life 
6r  widowhood,"  and  directed,  at  her  death  or  marriage,  that  his 
land,  slaves,  and  personalty  should  be  sold  by  his  executor,  and 
gave  specific  directions  how  the  proceeds  should  be  divided 
among  and  held  by  his  children.  The  slaves  he  directed  to  be 
sold  to  his  children  only. 

He  appointed  his  son,  William  Faucett,  his  sole  executor, 
who  qualified  and  took  upon  himself  the  execution  of  the  will. 

In  September,  1862,  after  the  death  of  the  widow,  the  land, 
slaves,  and  personalty  were  sold  publicly  to  the  highest  bidder, 
by  the  executor,  as  directed  in  the  will,  and  William  Faucett, 
the  executor,  purchased  the  land  at  the  price  of  five  dollars  fifty- 
one  and  one-half  cents  per  acre. 

On  the  21st  of  January,  1864,  this  action  in  equity  was  in- 
stituted by  William  Faucett  against  the  other  devisees  and  heirs 
of  said  testator,  alleging  the  foregoing  facts,  and  also  that  he  had 

12 


178  FAUCETT  v.  FAUCETT, 

paid  to  the  several  devisees  their  respective  portions  of  the  price 
for  which  the  land  was  sold,  which  they  had  received  without 
an  objection  on  their  part  to  the  manner  of  the  sale,  the  price  at 
which  he  purchased  the  land,  or  that  he  was  the  purchaser ;  that 
the  sale  was  a  fair,  open  sale  ;  that  there  was  competition  in  the 
bidding ;  and  the  land  sold  for  a  full,  fair  price.  He  makes  a 
copy  of  the  will,  the  receipts  of  the  devisees  to  him  for  their  re- 
spective parts  of  the  purchase-money,  and  the  deed  of  Sanders 
and  wife  to  himself  for  their  interest  in  the  estate,  Mrs.  Sanders 
being  a  daughter  and  one  of  the  devisees  of  testator,  parts  of  his 
petition,  and  prays  that  the  sale  may  be  confirmed  by  the  Court, 
and  that  the  devisees  and  heirs  of  testator  be  compelled  to  convey 
the  land  to  him. 

He  furthermore  alleges,  he  did  not  know  at  the  time  he  bid, 
that  it  was  illegal  or  improper  for  him  to  do  so  ;  but  believed  that, 
as  the  sale  was  open  and  public,  and  cried  by  an  Auctioneer,  he 
had  a  right  to  purchase.  On  final  hearing,  the  petition  was  dis- 
missed, and  it  is  stated  in  the  judgment  that,  u  the  attorney  of 
the  defendants  consenting  thereto,  the  dismissal  is  without  preju- 
dice ;"  and  to  reverse  that  judgment  William  Faucett  prosecutes 
this  appeal. 

The  transcript  of  the  record  before  us  shows  that  process  was 
issued  to  the  counties  of  Taylor,  Casey,  and  Hart  against  a  part 
of  the  defendants,  and  a  warning  order  taken  against  those  who 
were  proceeded  against  as  non-residents  ;  but  it  does  not  appear 
that  there  was  service  of  process  on  the  resident  defendants,  and 
none  answered  except  the  guardian  ad  litem  appointed  for  some 
of  the  infants. 

There  is  nothing,  therefore,  indicating  an  acquiescence  in  the 
sale  of  the  land  by  those  interested,  unless  it  can  be  inferred  from 
the  fact  of  their  reception  of  the  purchase-money,  and  the  addi- 
tional fact  that  several  of  them  were  present  at  the  sale  and  made 
no  objection.  This  latter  fact  is  proved  by  Cowherds,  the  auc- 
tioneer, and  the  only  witness  examined. 

Whether  or  not  a  court  of  equity  should  approve  the  sale  in 
this  case,  depends  upon  facts  not  fully  developed  in  this  record. 

The  doctrine  is  indisputably  established,  that  a  purchase  made 
by  a  trustee  or  guardian  of  the  trust  property,  or  by  an  executor 
of  the  estate  of  his  testator,  from  himself,  during  the  continuance 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  179 

of  the  fiduciary  character  of  the  purchaser,  will  not  be  sanctioned 
or  allowed  to  prevail,  unless  it  be  made  under  the  authority  of 
the  court,  or  with  the  full  concurrence  and  consent  of  the  persons 
beneficially  entitled  to  the  property,  who  are  competent  to  con- 
sent ;  and  even  then  it  will  be  regarded  with  suspicion. 

In  the  absence  of  such  corroborative  circumstances,  a  pur- 
chase of  this  nature,  however  fair  and  honest  in  itself,  is  voidable 
at  the  option  of  the  cestili  qiie  trust ;  nor  is  it  necessary  to  show 
that  the  trustee  has  made  any  profit  or  obtained  any  advantage 
by  his  purchase  ;  but  it  will  be  supported  if  found  to  be  beneficial 
to  the  trust  estate. 

And  it  is  immaterial,  in  this  respect,  that  the  purchase  is 
made  at  a  public  sale  by  auction,  or  another  person  as  agent  for 
the  person  standing  in  the  relation  of  trustee,  guardian,  executor, 
etc.,  Hill  on  Trustees,  158-9,  side  page  (a). 

A  trustee  or  executor  will  not  be  permitted  to  create  in  him- 
self an  interest  opposite  to  that  of  the  party  for  whom  he  acts, 
nor  to  traffic  in  the  estate  for  his  own  emolument  (and  the  same 
principle  applies  also  to  administrators),  5  J.  C.  R.  409 ;  Mea- 
clmm's  Heirs  v.  Meacham's  Adm'rs,  etc.,  Dana,  260. 

None  of  the  beneficiaries  under  the  will  are  shown  to  have 
been  before  the  court,  either  by  actual  service  of  process  or  by 
voluntary  appearance,  as  no  answer  was  filed  except  the  one 
filed  by  the  guardian  ad  litem  for  the  infant  defendants ;  nor  does 
it  appear  that  there  was  service  of  summons  on  the  infants ;  and 
whether  the  attorney  who  consented  to  the  dismissal  of  the  peti- 
tion represented  the  non-resident  defendants  for  whom  one  was 
appointed  or  not,  we  are  not  informed.  But  as  it  is  alleged  in 
the  petition  that  the  whole  of  the  purchase-money  has  been 

(a)  Campbell  v.  Walker,  13  Ves,  601 :  "The  lot  was  put  up  to  sale  by  auc- 
tion. My  opinion,  formed  after  great  consideration,  is  that  the  sale  by  auction 
makes  no  difference.  There  is  no  medium  of  sale  that  may  be  made  a  wider  inlet 
to  fraud  than  sales  by  auction." 

How  Trustees  may  become  Purchasers. — The  rule  governing  in  cases  where 
trustees  desire  and  purchase  with  the  consent  and  approval  of  the  court,  is  fully 
set  out  and  explained  in  Campbell  \.  Walker,  5  Ves.,  Jr.,  678.  The  party  petitions 
to  the  court  and  the  purchase  is  made  under  its  supervision. 

A  case  of  this  kind  has  but  lately  passed  under  the  supervision  of  the  Court 
of  Appeals  of  Kentucky,  and  was  approved  by  it.  It  was  a  case  where  the  sale 
was  to  advance  the  interests  of  the  beneficiaries,  and  for  reinvestment — so  stated 
to,  and  approved  by  the  court,  Norman  v.  Norman,  6  Bush,  496. 


FOLLANSBE  v.  KILBRETH, 


actually  paid  to  the  persons  entitled  thereto,  and  receipts  exhibited, 
and  it  may  turn  out,  upon  further  investigation,  that  the  purchase 
was  made  by  appellant  with  the  concurrence  and  consent  of  those 
beneficially  interested,  and  thereby  bring  the  case  within  one 
of  the  exceptions  to  the  general  rule,  and  as  it  is,  moreover, 
important  for  all  the  parties  that  the  estate  should  be  finally  set- 
tled and  wound  up,  the  court  below  should,  by  proper  proceed- 
ings, and  after  full  preparation,  either  confirm  the  sale  and  order 
a  conveyance,  or  set  aside  the  same  upon  equitable  principles, 
and  order  a  resale  of  the  land.  All  of  which  could  have  been 
done  under  the  prayer  for  general  relief. 

Wherefore,  the  judgment  is  reversed,  and  the  cause  remanded 
for  further  proceedings  consistent  herewith. 


CHARGES  FOLLANSBE,  APPELLANT,  v.  JAMES  P.  KILBRETH  AND 
HARVEY  DE€AMP,  APPELLEES. 

[/«   the  Supreme  Court  of  Illinois,  June  term,  1856,  Associate  Justice 
JOHN  D.  CATON  delivering  the  opinion.    Reported  in  17  Illinois,  522.] 

APPEAL  FROM  COOK  COUNTY  COURT  OF  COMMON  PLEAS. 

When  a  person  purchases  property  as  the  agent  of  another,  though  he  may  have 
the  deed  or  contract  of  sale  made  out  in  his  own  name,  the  principal,  from 
the  moment  of  the  purchase,  acquires  an  equitable  title  thereto,  subject  to  all 
the  incidents  attaching  to  such  an  estate,  and  the  agent  holds  it  in  trust  for 
the  principal. 

An  equitable  title,  derived  under  such  circumstances,  may  be  divested  out  of  the 
cestui  que  trust  otherwise  than  by  alienation,  before  the  trust  is  actually  per- 
formed. If  the  trustee  has  practised  any  fraud  toward  his  cestui  que  trust,  the 
latter  may,  when  he  discovers  the  fraud,  repudiate  the  acts  and  purchase  of 
the  trustee,  and  thus  divest  himself  of  his  equitable  title,  or  he  may  waive  the 
fraud  and  claim  his  rights  as  cestui  que  trust;  or,  before  he  has  discovered  the 
fraud,  he  may  treat  the  purchase  as  his  own  by  selling  his  equitable  title. 
The  cestui  que  trust  may  also  divest  himself  of  his  equitable  title  by  laches, 
fraud,  or  by  agreement. 

A  court  of  equity  will  not  permit  a  cestui  que  trust  to  show  a  speculative  disposi- 
tion toward  his  trustee.  If  a  cestui  que  trust  discovers  facts  which  would  give 
him  a  right  to  repudiate  the  acts  of  his  trustee,  and  has  investigated  them,  or 
had  a  reasonable  time  to  do  so,  he  is  bound  to  declare  whether  he  will  avail 
himself  of  the  right  or  not,  and  can  not  lie  by  in  a  position  to  affirm  the  bar- 
gain, if  a  profitable  one,  and  repudiate  it  if  it  is  a  losing  one. 


IN  THE  SUPREME  COURT  OF  ILLINOIS.  181 

Where  a  cestui  gue  trmt,  having  a  right  to  repudiate  a  transaction,  laid  by  for 
three  years,  and  suffered  his  trustee  to  go  on  and  make  payments  for  the 
property :  Held,  he  was  not  entitled  to  relief. 

THIS  was  a  bill  in  chancery,  filed  February  17,  1854,  in 
the  Cook  County  Court  of  Common  Pleas,  by  the  appellees 
against  the  appellant,  praying  for  a  decree,  declaring  the  defend- 
ant to  be  a  trustee  of  the  complainants  of  block  57,  Canal  Trus- 
tees, subdivision  of  sec.  7,  T.  39  N.,  R.  14  E.,  and  for  a  convey- 
ance, etc.  It  appeared,  that  on  or  about  the  7th  of  November, 

1848,  the  defendant  purchased   the   above   block  for  $1,500; 
$500  of  which  was  paid  by  a  conveyance  of  eighty  acres  of  land, 
belonging  to  the  defendant  in  M'Henry  County ;  $250  was  paid 
in  cash;  and  the  remainder  on  the   6th   of   September,    1849, 
1850,  and  1851.     The  defendant  took  from  the  vendor  a  bond  to 
himself,  for  a  deed  when  the  deferred  payments  should  be  made. 
The  bill  sets  forth  a  voluminous  correspondence  between  the  par- 
ties, showing  that  the  defendant  purchased  the  property  as  the 
agent  of  the  complainants  and  one  Person,  who  had  since  trans- 
ferred his  interest  to  them,  and  that  the  taking  of  a  bond  for  a 
deed  to  the  defendant  was  contrary  to  their  instructions. 

The  answer  sets  forth  a  further  correspondence  between  the 
parties,  showing  that  the  defendant  executed  his  own  bond  to  th<? 
complainants  and  Person  for  the  conveyance  of  the  property, 
upon  payment  of  the  sum  of  $1,500,  less  $375  in  the  defendant's 
hands,  in  three  annual  installments,  due  on  the  1st  of  September, 

1849,  1850,  and  1851  ;  and  claiming  that  they  had  accepted  of 
the  relation  of  vendee  of  the  defendant,  and  were  bound  by  the 
term  of  the  contract. 

As  an  excuse  for  not  making  the  payments  at  the  times  when 
they  became  due,  the  complainants  alleged  that  the  defendants 
misrepresented  to  them  the  value  of  the  land  purchased';  and  had 
paid  his  own  land  toward  the  purchase  at  the  nominal  sum  of 
S500,  when  in  truth  and  in  fact,  it  was  only  worth  $100  or  $200 
at  the  time.  Evidence  was  introduced  to  support  these  allega- 
tions. 

The  other  facts  in  the  case  sufficiently  appear  in  the  state- 
ment of  them  in  the  opinion  of  the  Court. 

C.  Becfavith  and  'A.  Huntington,  for  appellant.  G.  Goodricli, 
for  appellees. 


182  FOLLANSBE  v.  K1LBRETH, 

CATON,  J.  I  agree  with  the  position  assumed  by  the  com- 
plainants' counsel,  that  when  the  true  character  of  the  original 
transaction  is  fairly  understood,  the  positions  of  the  parties  must 
be  considered  as  that  of  principals  and  agent,  and  that  the  land 
was  purchased  by  Follansbe  in  trust  for  the  complainants,  although 
the  purchase  was  nominally  to  himself.  Nor  do  I  deem  it  essen- 
tial to  inquire  whether  their  subsequently  treating  him  as  their 
vendor  without  objection,  changed  that  relation  so  as  to  entitle 
him  to  insist  upon  the  rights  of  a  vendor  instead  of  a  trustee.  If 
he  is  entitled  now  to  the  position  of  a  vendor,  there  is  no  pretense 
for  inferring  a  specific  performance  against  him  by  reason  of  the 
inexcusable  laches  of  the  purchasers,  so  that  the  first  bill  which 
was  filed  with  that  view  was  no  doubt  properly  dismissed.  We 
shall,  for  the  present,  consider  the  case,  assigning  to  Follansbe 
the  position  of  agent  and  trustee.  Considering  such  to  be  the 
case,  the  complainants  acquired  an  equitable  title  to  the  premises 
the  moment  the  purchase  was  made,  which  was,  at  the  time  sub- 
ject to  all  the  incidents  attaching  to  such  an  estate.  It  is  assumed 
on  the  part  of  the  complainants  that  such  an  interest  could  not  be 
divested  except  by  alienation.  They  assert  that  when  a  trust 
once  exists  it  must  always  continue  till  it  is  performed.  In  this 
they  are  undoubtedly  mistaken,  as  may  be  shown  by  the  very 
case  made  in  this  bill.  Admitting  the  fraud  which  is  charged 
against  Follansbe,  and  they  have  undoubtedly  a  right  to  repudi- 
ate his  acts  in  purchasing  the  land  and  taking  the/  bond  for  a 
title  to  himself,  and  compel  him  to  assume  all  the  responsibilities 
of  a  purchaser,  or  they  might  waive  the  fraud  and  claim  their 
rights  as  cestuis  que  trust.  Or  they  might,  before  they  discovered 
the  fraud,  considering  themselves  bound  by  the  acts  of  their 
agent,  treat  the  purchase  as  their  own,  and  sell  their  equitable 
title,  which  would  undoubtedly  be  a  valid  sale.  Or,  not  having 
sold,  they  might,  when  they  discovered  the  fraud,  abandon  it  on 
account  of  the  fraud.  By  adopting  the  latter  course,  they  would, 
no  doubt,  divest  themselves  of  that  equitable  title  to  which  they 
had  a  right  to  assert  a  claim,  and  which  was  actually  vested  in 
them  till  the  time  of  such  renunciation.  In  this  case,  then,  they 
would  become  divested  of  an  equitable  title  in  or  right  to  the  land, 
without  any  alienation.  These  rights  must  be  reciprocal  when 
circusnstances  are  so  changed  as  to  leave  an  option  of  election  in 


IN  THE  SUPREME  COURT  OF  ILLINOIS.  183 

the  trustee,  whether  he  will  recognize  further  the  existence  of  an 
equitable  title  in  the  cestuis  que  trust,  as,  where  they  may  have 
been  guilty  of  a  fraud  in  inducing  the  trustee  to  act  for  them  and 
incur  personal  responsibilities  which  he  would  not  have  under- 
taken but  for  the  fraud  practiced  upon  him.  Such  a  case  of 
fraud  might,  no  doubt  be  supposed  on  the  part  of  the  principals 
as  would  justify  him  in  repudiating  the  agency,  and  thus,  without 
their  consent,  would  the  principals  be  divested  of  their  equitable 
estate,  which  till  then  would  have  existed,  and  which  would  have5 
continued  to  exist  had  the  agent  chosen  to  have  recognized  it. 

Again,  such  equitable  estate  might,  no  doubt,  be  destroyed 
by  the  mutual  agreement  of  both  parties,  without  fraud  on  either 
side.  Nor  am  I  prepared  to  say  that  such  an  estate  might  not 
be  defeated  by  laches,  or  subsequent  misconduct  on  the  part  of 
the  principals  or  cestuis  que  trust. 

Let  us  address  ourselves  to  the  case  in  hand  and  apply  these 
principles  to  the  facts  before  us. 

The  complainants  resided  in  Ohio,  and  the  defendant  in  Chi- 
cago, where  the  premises  in  question  are  situated.  In  November 
1848,  the  defendant,  as  the  agent,  and  for  the  benefit  of  the  com- 
plainants, purchased  the  property  in  his  own  name,  for  fifteen 
hundred  dollars,  of  which  he  paid  five  hundred  in  a  lot  of  land 
which  he  owned  in  M'Henry  County,  and  two  hundred  and  fifty 
in  money,  and  gave  his  obligation  to  pay  the  balance  in  one,  two 
and  three  years,  with  six  per  cent  interest.  The  purchase  was 
approved  by  the  complainants,  who  received  a  certified  copy  of  a 
bond  for  a  deed  to  themselves  from  the  defendant,  which  had 
been  executed  and  recorded,  and  miscarried  in  the  mail.  The 
bond  obligated  the  defendant  to  convey  the  land  to  the  complain- 
ants upon  their  paying  to  him  the  fifteen  hundred  dollars,  one- 
fourth  down,  and  the  balance  in  three  equal  annual  installments. 
No  objection  was  then  made  or  subsequently,  till  this  bill  was 
filed,  that  the  defendant  originally  purchased  the  land  in  his  own 
name  instead  of  the  complainants.  At  the  time  of  Follansbe's 
purchase  he  had  in  his  hands  three  hundred  and  seventy-five 
dollars  of  the  money  of  the  complainants  for  the  purpose  of  in- 
vestment in  land,  which  was  sufficient  to  pay  the  first  install- 
ment. Before  the  second  payment  fell  due,  Follansb^  wrote  to 
the  complainants  to  put  him  in  funds  to  meet  it,  which  they  neg- 


184  FOLLANSBE  v.  KILBRETH, 

lected  to  do.  This  payment  fell  due  on  the  1st  of  September, 
1849.  Up  to  this  time,  their  correspondence  shows  that  the, 
complainants  felt  perfectly  satisfied  with  the  purchase  and  with 
the  course  of  the  defendant  in  relation  to  it,  but  it  is  quite  appar- 
ent that  as  they  resided  at  a  distance,  they  derived  their  infor- 
mation in  relation  to  the  value  of  the  land  solely  from  Follansbe, 
and  placed  implicit  confidence  in  his  integrity  and  representa- 
tions. In  the  latter  part  of  September,  1849,  Kilbreth,  one  of 
the  complainants,  visited  Chicago,  and  examined  the  premises, 
and  made  inquiries  as  to  their  value,  and  for  the  first  time,  ex- 
pressed dissatisfaction  with  the  purchase ;  and  shortly  after,  on 
the  24th  of  November,  Person,  another  of  the  purchasers,  wrote 
to  the  defendant  accusing  him  of  fraud  in  misrepresenting  the 
value  of  the  land,  and  offering  to  take  it  at  one  thousand  dollars.' 
To  this  the  defendant  replied,  vindicating  himself,  but  I  confess, 
without  satisfactorily  explaining  the  representations  he  had  made 
as  to  the  value  of  the  land,  and  the  prices  at  which  contiguous 
land  had  been  sold.  The  defendant  concluded  that  letter  in  these 
words  :  "  Now,  all  I  ask  of  you  is  to  remit  me  the  payment  on 
this  purchase  now  due,  or  forever  hereafter  hold  your  peace.'* 
To  this  letter  no  answer  appears  to  have  been  given,  nor  was  the 
money  remitted  as  requested,  bwt  the  defendant  was  left  to  pay 
the  purchase-money  with  his  own  funds. 

When  Kilbreth,  one  of  the  complainants,  was  in  Chicago,  in 
September,  1849,  after  the  second  payment  fell  due,  he  employed 
Mr.  Rees,  a  land  agent  in  Chicago,  to  examine  the  title,  and  with 
him  examine  the  land.  At  this  time,  he  appears  to  have  been 
dissatisfied  with  the  purchase.  And  he  then  told  Rees  that  he 
did  not  intend  to  make  any  further  payments  on  the  property,  or 
under  contract,  or  on  the  bond,  to  Follansbe  (in  his  various  ex- 
aminations houses  all  three  expressions),  unless  the  land  should 
increase  considerably  in  value.  He  left  Chicago  without  making 
any  payment  to  the  defendant,  or  putting  him  in  funds  with 
which  to  make  the  payment,  then  overdue,  on  the  original  pur- 
chase. Nor  did  they  put  Follansbe  in  funds,  or  make  the  subse- 
quent payments  as  they  fell  due.  Nor  do  they  appear  to  have 
taken  any  further  notice  of  the  purchase,  or  to  have  done  any  thing 
in  relation  to  it  subsequent  to  the  correspondence  above  referred 
to,  till  nearly  three  years  after,  and  after  the  time  for  making  the 


IN  THE  SUPREME  COURT  OF  ILLINOIS. 


last  payment  had  expired.  In  October,  1852,  they  appeared 
and  tendered  to  the  defendant  the  amount  due  on  the  bond  which 
he  had  given  them  for  a  conveyance. 

We  can  not  hesitate  to  say  that  here  was  a  clear  abandon- 
ment of  whatever  rights  they  had  in  the  purchase  made  by  the 
defendant  for  them  as  their  agent  or  trustee.  They  had  an  un- 
doubted right  to  a  reasonable  time  to  investigate  the  conduct  of 
their  agent;  and,  if  they  found  he  had  practiced  a  fraud  upon 
them,  to  repudiate  the  purchase,  and  make  him  assume  its  re- 
sponsibility ;  but,  in  doing  so,  they  must  necessarily  relinquish 
to  him  its  benefits.  For  this  there  was  an  abundance  of  time 
prior  to  the  maturity  of  the  second  payment.  They  did  make 
such  investigation,  and  condemned  his  conduct,  and  refused  to 
go  on  with  the  purchase.  This  is  apparent,  from  the  fact  that 
they  refused  to  put  him  in  funds  or  make  the  payment  then  due, 
and  from  the  letter  which  Person  wrote  to  him  in  the  November 
following,  in  which  they  not  only  decline  to  go  on  with  the  pur- 
chase upon  the  original  terms,  but  propose  a  new  arrangement, 
and  to  take  it  at  one- third  less ;  but  above  all  is  their  intention 
apparent  not  to  hold  themselves  bound  by  the  purchase  in  the 
declarations  made  by  Kilbreth  to  Rees,  at  the  time  he  was  in 
Chicago,  in  September,  1849,  in  which  he  declared  they  would 
make  no  more  payments  unless  the  land  rose  considerably  in 
value.  Now,  this  declaration  shows  unequivocally  an  intention 
to  speculate  on  the  chances  of  an  enhancement  in  the  value  of 
the  land.  He  made  no  complaint  of  a  want  of  information  on 
the  subject,  and  no  doubt  or  objection  to  the  title;  but  the  value 
of  the  property  was  the  only  point  involved  in  his  consideration 
of  the  subject.  On  this  point  there  can  be  no  doubt  he  fully 
informed  himself,  and  upon  the  value,  as  it  then  stood,  he  chose 
not  to  go  on  with  the  purchase,  reserving  to  himself,  if  he  might 
do  so,  the  right  to  reserve  the  benefits  of  it,  should  it  subse- 
quently rise  in  value,  so  as  to  make  it  a  good  speculation.  This 
speculative  disposition  is  as  repulsive  to  a  court  of  equity,  in  a 
cestui  que  trust,  toward  his  trustee,  as  in  a  purchaser  toward  his 
vendor.  The  one  is  as  much  bound  to  deal  fairly  as  the  other. 
The  law  must  prohibit  the  one  as  much  as  the  other  from  spec- 
ulating upon  chances  or  future  events.  Granting  to  complain- 
ants the  right  to  repudiate  this  purchase,  and  throw  it  upon  the 


186  FOLLANSBE  v.  KILBRETH, 

hands  of  the  defendant  for  any  cause,  he  had  a  right  to  know 
whether  they  would  avail  themselves  of  that  right,  so  soon  as 
they  discovered  the  facts  which  conferred  upon  them  that  right, 
and  had  investigated,  or  had  a  reasonable  time  to  investigate, 
the  facts  by  which  their  election  to  affirm  or  disaffirm  his  acts 
was  to  be  controlled.  They  had  no  right  to  hold  him  in  sus- 
pense while  they  could  take  the  chances  of  the  fluctuations  in 
the  value  of  the  land.  An  attempt  was  made  upon  the  argument, 
which  is  also  apparent  in  the  examination  of  Rees,  to  avoid  the 
effect  of  his  testimony,  by  insisting  that  Kilbreth  did  not  intend 
to  repudiate  the  original  purchase  made  by  Follansbe  for  them, 
as  their  trustee,  but  that  he  had  reference  solely  to  the  purchase 
they  had  apparently  made  of  him,  by  accepting  his  bond  for  a 
deed;  but  this  distinction  will  not  bear  the  scrutiny  of  an  im- 
partial examination.  It  is  very  apparent  that  Kilbreth,  at  the 
time,  had  no  such  distinction  in  his  mind,  but  that  his  declara- 
tions were  made  in  reference  to  the  whole  transaction,  and  to 
whatever  right  they  had  in  it  5  and  that  he  intended  to  make 
no  further  payments  toward  the  land,  in  any  way,  unless  it 
should  rise  in  value.  Unless  such  rise  should  take  place,  he 
intended  to  throw  the  land,  and  all  consequent  responsibilities, 
upon  Follansbe.  Had  he  intended  to  abandon  any  rights  under 
the  bond,  and  to  insist  that  the  original  purchase  was  made  for 
their  benefit,  he  would  undoubtedly  have  so  explained  himself 
at  the  time. 

This  distinction  must  be  looked  upon  as  an  after-thought. 
Nor  will  it  do  to  say  that  Kilbreth  was  ignorant  of  the  law,  and 
did  not  know  that  he  had  a  right  to  claim  that  the  original  pur- 
chase was  made  in'trust  for  them,  and  that  Follansbe  was  only 
their  trustee,  and,  hence,  not  knowing  it,  he  could  not  assist 
their  rights  against  him  in  that  capacity.  Knowing  the  facts, 
he  was  bound  to  know  the  law,  and  the  defendant  was  no  more 
bound  to  wait  three  years,  for  them  to  learn  what  were  their 
legal  rights,  than  he  was  bound  to  wait  to  see  whether  the  prop- 
erty would  rise  in  value  or  not.  During  that  time  Follansbe 
was  bound  to  meet  the  payments  upon  the  land,  and  he  had  a 
right  to  know  whether  he  was  making  those  payments  for  him- 
self or  for  them,  and  whether  he  had  a  right  to  dispose  of  the  land 
in  the  mean  time,  to  protect  himself,  should  an  opportunity  offer. 


IN  THE  SUPREME  COURT  OF  ILLINOIS.  187 

But  it  was  said  that  the  complainants  had  not  yet  been  able  to 
learn  whether  the  title  which  Follansbe  had  purchased  was  good 
or  not,  and  that  they  had  a  right  to  know  what  the  title  was,  be- 
fore they  decided  whether  to  avail  themselves  of  the  benefits  of 
the  purchase  or  not.  Whether  this  be  so  or  not,  it  is  very  cer- 
tain that  the  question  of  title  had  no  influence  on  the  minds  of 
the  complainants  in  determining  on  the  propriety  of  the  pur- 
chase. No  doubt  or  question  seems  to  have  arisen  on  that  point. 
Had  any  arisen,  and  the  records  were  not  satisfactory,  the  most 
natural  and  proper  inquiry  would  have  been  of  the  defendant, 
had  he  really  desired  to  have  his  doubts  solved,  who  could  have 
given  him  a  satisfactory  explanation  at  once.  No  such  inquiry 
seems  to  have  been  made,  and  we  are  constrained  to  the  con- 
clusion that  his  conduct  was  not  controlled  in  the  least  degree 
by  any  question  as  to  the  title.  If  it  was,  then  he  acted  un- 
fairly, by  not  applying  to  the  defendant,  and  giving  him  an  op- 
portunity of  satisfying  him  on  the  subject.  It  is  evident  that 
this  question  of  title  was  also  an  after-thought. 

Even  after  all  that  Kilbreth  did  in  September,  when  in  Chi- 
cago, and  after  Person's  letter  in  November  following,  evincing  a 
settled  disposition  not  to  be  bound  by  the  purchase  in  any  way, 
or  to  make  any  further  payments  on  it,  Follansbe  wrote  them, 
giving  them  still  an  opportunity  of  reconsidering  the  matter,  and 
completing  the  purchase,  and  admonishing  them  that  if  they  still 
persisted  in  refusing  to  do  so,  he  should  acquiesce  in  their  elec- 
tion to  throw  the  purchase  upon  his  hands,  and  to  assume  it  on 
his  own  account ;  and  still  expressing  the  opinion  that  it  would 
turn  out  an  advantageous  operation.  Such  is  the  effect  of  the 
defendant's  last  letter  to  Person.  To  this  letter  no  answer  appears 
ever  to  have  been  made,  and  no  funds  were  sent.  If  what  had 
previously  transpired  was  not  conclusive  upon  the  complainants, 
as  an  abandonment  of  the  purchase,  their  profound  silence  for 
nearly  three  years  after  this  correspondence  must  surely  be  con- 
strued into  an  acquiescence  in  the  proposition  of  the  defendant, 
that  they  would  hold  their  peace.  The  defendant  had  a  right  so 
to  understand  their  silence.  Unless  we  can  say  that  they  had  a 
right  to  lie  by  indefinitely,  to  see  if  property  would  not  rise  in 
value,  so  as  to  make  the  purchase  a  speculation,  and  if  it  should 
fall  in  the  market,  to  throw  the  loss  on  the  defendant,  and  if  it 


188  FOLLANSBE  v.  KILBRETH, 

should  rise,  to  claim  the  advance  as  their  own,  we  must  conclude, 
from  all  that  took  place,  that  they  abandoned  the  purchase. 
Unless  the  defendant  was  deprived  of  all  rights  to  protect  himself, 
unless  they  could  compel  him  to  make  all  the  payments  and 
run  all  the  risks,  and  then,  after  waiting  as  long  as  they  chose, 
adopt  or  reject  his  acts  as  subsequent  events  might  dictate,  they 
must  be  held  to  have  abandoned  the  purchase.  Admitting  that 
Follansbe  had  paid  too  high  a  price  for  the  land,  fraudulently 
and  for  his  own  advantage,  as  charged  in  the  bill,  there  was  still 
some  limit  to  the  extent  of  their  rights  ;  nor  was  he  deprived  of 
all  his.  The  greatest  malefactor  has  rights,  which  courts  of  jus- 
tice will  protect ;  and  the  defendant,  admitting  the  truth  of  all 
that  is  charged  against  him,  is  not  in  a  worse  condition.  He  was 
not  entirely  at  the  mercy  of  the  complainants.  They  were  bound 
in  a  reasonable  time,  to  decide  definitely  whether  they  would 
adopt  or  repudiate  his  acts ;  and,  having  decided,  they  were 
bound  by  it.  They  could  not,  after  having  charged  the  defend- 
ant with  fraud,  and,  in  consequence  thereof,  repudiated  his  acts, 
and  refused  to  advance  the  money  to  meet  the  payments,  leaving 
him  to  make  them,  come  in,  after  three  years'  silence  and  acqui- 
escence, and  revive  their  claim,  and  seize  upon  a  speculation 
which,  in  the  mean  time,  had  become  inviting  by  a  rise  in  the 
property,  which  they  did  not  anticipate,  or  of  which,  at  least, 
they  wanted  confidence.  If,  when  Kilbreth  was  in  Chicago,  in 
September,  1849,  they  intended  to  repudiate  the  relation  of 
vendor  and  vendee,  as  between  themselves  and  the  defendant,  and 
to  assert  that  of  trustee  and  cestuis  que  trust,  justice  and  equity 
required  that  he  should  then  have  declared  his  intention,  and 
have  met  the  responsibilities  of  the  position  thus  assumed,  by 
paying  the  money  due  from  them  on  the  purchase.  But  they 
avowed  no  such  intention,  nor  did  they  evince  any  by  their  con- 
duct. If  they  kept  silence  when  equity  required  them  to  speak, 
they  can  not  be  allowed  to  speak  when  equity  requires  them  to 
keep  silence.  This  is  an  old  maxim,  and  applicable  to  the  case 
before  us.  We  think  the  complainants  have  not  made  out  a  case 
for  the  relief  prayed,  and  that  the  bill  should  have  been  dis- 
missed. For  convenience,  I  have  treated  the  case  as  if  Person  had 
not  sold  out  to  his  associates,  and  was  one  of  the  complainants, 
as  it  could  make  no  difference  in  the  result. 


IN  THE  SUPREME  COURT  OF  ILLINOIS.     /  #>  -189 


The  decree  must  be  reversed  and  the  bill  dismissed.     DECREE 

REVERSED   («). 

(a)  See  as  to  confirmation  or  ratification,  the  preceding  case  herein,  Hoffman 
Coal  Company  v.  Cumberland  Coal  Company,  page  87,  and  especially  the  valuable, 
note  thereto,  on  page  98.  Also,  notes  to  authorities  on  ACQUIESCENCE,  pp.  38,  72. 

After  giving  several  cases  wherein  defenses  of  the  nature  indicated  by  these 
terms  have  been  held  not  to  bar  the  action,  it  is  highly  proper  that  some  should  be 
furnished  wherein  they  have  been  sustained.  The  foregoing,  as  well  as  that  of 
Wade  v.  Peltibone,  11  Ohio,  57  (which  follows),  have  been  selected  as  fair  adjudi- 
cations sustaining  the  doctrine  of  election  or  ratification.  In  each  case,  the  parties 
appear  to  have  stood  upon  an  equality.  The  requisites  to  constitute  a  binding 
confirmation  existed,  as  laid  down  by  Lewin  on  Trusts  (see  note  aforesaid,  p.  98  ): 
"1.  The  confirming  party  must  be  sui  juris,  and  not  laboring  under  any  disability, 
as  infancy  or  coverture  ;"  and  after  full  information,  the  cestuis  que  trust  having 
freely  and  intelligently  elected  to  take  their  course,  the  courts  respectively  and 
properly  held  that  they  were  bound  by  such  election.  The  characteristic  brevity 
and  terseness  of  Judge  LANE  is  noticeable  in  the  case  taken  from  the  Ohio  Reports. 

These  two  cases  will  be  found  to  differ  materially  from  that  of  Jones  v. 
Smith,  33  Mississippi,  215,  also  given  hereinafter.  This  case  is  reprinted  —  not  as 
an  authority,  but  the  better  to  illustrate  the  true  rule  in  the  premises,  by  pro- 
ducing all  that  can  be  said  in  behalf  of  an  erroneous  and  not  well-considered 
judgment. 

On  the  other  hand,  reference  is  here  made  to  a  case  which  recognizes  the 
equitable  rights  of  the  trustee,  and  treats  him  with  the  same  regard  for  justice 
that  is  required  at  his  hands. 

Dale  v.  Hamilton,  22  English  Chancery,  266  :  "  A  and  B,  for  whom  land  had 
been  purchased  by  C,  with  a  view  to  its  being  resold  in  building  lots,  on  the  land 
being  conveyed  to  them,  signed  a  paper  writing  purporting  to  be  a  memorandum 
of  agreement  between  them  relative  to  the  land,  by  which  it  was  agreed  'that 
they  should  each  advance  half  the  purchase-money  and  receive  interest  on  the 
same  at  five  per  cent,  and  that  they  were  to  have  each  one-third  interest  in  the 
purchase,  and  to  reserve  one-third  of  the  profits  arising  therefrom  for  C.  in  lieu 
of  his  commission  for  'purchasing,  selling,  surveying,  valuing,  and  laying  out  the 
land  in  lots,  or  any  other  services  that  may  be  required  of  him  ;  but  that  it  was 
clearly  and  distinctly  understood  that  C  should  have  no  power  or  authority 
whatsoever  over  the  land,  and  that  he  should  not  be  entitled  to  receive  any  com- 
pensation therefrom  until  the  whole  was  sold  and  paid  for.'  The  land  having 
afterward  greatly  increased  in  value,  A  and  B  refused  to  .recognize  C's  interest 
in  the  speculation,  and  offered  him  a  money  compensation  for  his  services,  where- 
upon C,  who  had  objected  from  the  first  to  the  clause  in  the  memorandum  which 
excluded  him  from  all  control,  as  inconsistent  with  the  original  terms  for  which 
he  had  verbally  stipulated,  filed  his  bill  for  an  immediate  sale  of  the  land.  And 
the  court,  being  of  opinion  that  the  defendants,  by  repudiating  the  trust  as  to  C's 
share,  had  devolved  upon  the  court  the  discretion  which  they  had  by  the  memo- 
randum reserved  exclusively  to  themselves,  as  to  the  time  of  sale,  declared  C  en- 
titled to  one-third,  and  referred  it  to  the  master  to  inquire  whether  it  would  be 
for  the  benefit  of  all  parties  that  the  land  should  be  sold." 


190  —  I     t  WADE  v.  PETTIBONE, 


M.  S.  WADE  v.  M.  D.  PETTIBONE. 

[This  case  was  decided  in  the  Supreme  Court  of  the  State  of  Ohio,  at 
its  December  term,  1841,  Chief  Justice  EBENEZER  LANE  delivering  the 
opinion.  Reported  in  n  Ohio,  57.] 

The  creditor  in  an  execution  may  claim  the  benefit  of  a  purchase  made  by  his 
attorney,  especially  if  the  whole  debt  is  not  paid.  But  he  must  assert  his 
right  in  a  reasonable  time. 

THIS  is  a  bill  in  chancery,  from  the  county  of  Delaware. 

In  1835,  the  Miami  Exporting  Company,  having  been,  for 
many  years,  a  suspended  institution,  and  being  about  to  recom- 
mence business,  made  certain  dispositions  of  their  then  existing 
debts,  for  the  benefit  of  their  old  stockholders.  By  a  resolution 
of  the  13th  of  July,  1835,  they  divided  their  debts  into  classes, 
rating  them  after  the  probability  of  making  collections ;  and, 
on  the  fourth  class,  which  they  called  "  desperate"  they  author- 
ized their  agent  to  retain,  as  a  compensation,  fifty  per  centum 
on  the  amount  collected.  They  appointed  the  plaintiff  their 
agent,  and  authorized  the  president  to  convey  to  him,  in  trust 
for  the  stockholders,  all  the  property,  of  every  description, 
owned  by  the  institution. 

Some  time  in  1835  or  1836,  the  plaintiff  employed  the  de- 
fendant, who  is  a  solicitor  in  chancery,  to  bring  a  suit  to  fore- 
close a  mortgage,  in  Delaware  County,  against  the  heirs  of 
James  Keys,  one-third  of  which  belonged  to  the  Bank  of  the 
United  States,  and  the  two-thirds  to  the  Miami  Exporting  Com- 
pany. The  suit  was  duly  prosecuted,  and  the  land  advertised 
for  sale,  on  the  3d  day  of  October,  1836. 

On  the  7th  of  September,  1836,  about  four  weeks  before  the 
sale,  Pettibone  wrote  a  letter  to  Wade,  advising  him  that  the 
land  had  been  appraised  by  the  master,  and  of  the  time  of  sale, 
and  inquiring  if  he  should  bid  it  in  for  the  company,  if  it  should 
sell  for  less  than  the  appraisement.  No  answer  to  this  letter 
was  received,  at  the  time  of  the  sale,  and  Pettibone  attended, 
and  bid  it  in,  in  his  own  name.  On  the  llth  of  October,  eight 
days  after  the  purchase,  Wade  wrote  to  Pettibone  instructions 
to  purchase  the  property. 


IN  THE  SUPREME  COURT  OF  OHIO.  191 

On  the  29th  of  November,  1836,  Pettibone  again  wrote  to 
Wade,  reciting  the  sale  and  his  purchase ;  as  he  inferred,  from 
his  receiving  no  answer  to  his  letter,  that  the  company  did  not 
wish  to  purchase ;  but  that,  since  his  letter  had  been  mislaid, 
he  was  now  willing  to  relinquish  his  purchase  to  the  company, 
and  would  release  when  he  acquired  a  title  from  the  master.  He 
offered,  however,  to  take  it  at  the  appraisement,  and  if  they 
deemed  it  best  to  retain  it,  he  would  convey  all  his  interest,  as 
soon  as  he  got  his  deed. 

On  the  9th  of  December,  Wade  replied  to  this  proposition, 
that  Pettibone  might  retain  the  land  at  $2  per  acre,  and  if 
he  did  not  accept  it  on  these  terms,  he  directed  the  deed  to  be 
made  to  M.  S.  Wade,  trustee,  and  agent  of  the  Miami  Export- 
ing Company. 

Pettibone,  on  the  27th  of  December,  by  another  letter,  re- 
newed his  offer  to  purchase;  to  pay  $1,200,  on  certain  pay- 
ments, and  repeating,  if  these  terms  were  not  accepted,  to 
forward  to  Wade  a  deed,  if  he  preferred  it,  on  the  return  of 
the  master. 

Wade  answered  this  letter  on  the  10th  of  April;  declines 
setting  a  price  upon  the  land,  until  he  sees  it,  and  expects  uio 
be  up ''  (to  Delaware)  some  time  in  May,  and  offers  the  prefer- 
ence to  Pettibone,  if  he  concludes  to  sell. 

No  further  communication  was  had  between  these  parties, 
until  August,  1839,  a  period  of  two  years  and  four  months.  In 
the  Spring  of  1839,  the  master  pressed  Pettibone  for  adjustment 
of  the  purchase-money.  In  June,  1839,  Pettibone  visited  Cin- 
cinnati, the  residence  of  the  plaintiff,  and  he  says,  in  his  an- 
swer, he  sought  him,  and  could  not  find  him.  He  then  paid  into 
the  office  of  the  company  the  purchase-money,  $650.89,  after 
deducting  the  master's  costs  and  his  own  fees,  and,  thenceforth, 
claimed  the  land  as  his  own. 

Po^veU,  for  the  plaintiff.     Finch,  for  defendant. 

LANE,  C.  J.  The  ground  upon  which  the  defendant  claims 
the  right  to  withdraw  his  offer  to  relinquish  his  title  to  the  land, 
is  because,  he  says,  that  offer  was  made  to  the  company,  but  that 
he  has  discovered  Wade  claims  the  title,  as  his  own,  and  not  for 
the  benefit  of  the  company.  Much  of  the  argument  is  devoted 


192  WADE   v.  PETTIBONE, 

to  the  examination  of  the  proofs  bearing  on  this  point.  It  will 
be  unnecessary  for  us  to  notice  this,  because,  in  our  opinion,  the 
case  will  be  decided  upon  principles  among  which  this  loses  its 
character  and  importance. 

Pursuing  the  facts,  in  the  order  of  their  occurrence,  the  first 
proposition  to  be  considered  is,  whether  the  attorney  or  solicitor 
can  purchase,  at  a  sale  under  the  execution,  which  his  client  is 
seeking  to  enforce ;  as,  between  him  and  the  debtor,  as  between 
him  and  third  persons,  such  sale  is  without  objection ;  but  it  is 
another  question,  between  him  and  his  client,  when  the  law 
creates  confidential  relations.  The  attorney  is  retained  for  the 
purpose  of  doing  all  in  his  power  to  advance  the  client's  inter- 
ests, and,  especially,  that  the  property  should  produce  enough, 
by  sale,  to  pay  the  whole  debt.  For  this  purpose,  although  not 
the  agent  of  the  law,  in  making  sales,  he  has  a  large  control  as 
to  the  management  of  the  execution.  Without  adverting  to 
other  means  of  influence,  he  can  select  his  time  to  set  the  ma- 
chinery of  the  law  in  motion,  and  he  can  countermand,  or  post- 
pone it,  for  the  purpose  of  obtaining,  for  his  client,  a  better 
price.  But,  if  he  were  permitted  to  purchase,  it  would  be  his 
interest  to  buy  at  the  least  price ;  his  personal  interest,  there- 
fore, would  be  adverse  toNthat  of  his  client,  especially  if  the 
property  did  not  produce  enough  to  pay  the  whole  debt.  He 
would  be  enabled  to  gain,  by  sacrificing  his  client's  interest, 
and  the  lower  the  price,  the  greater  would  be  his  advantage, 
and  the  greater  his  client's  loss.  To  prevent  this  collision  of 
interests — to  destroy  the  temptation  of  abusing  opportunities,  for 
obtaining  personal  advantages,  at  the  expense  of  confidential 
obligations,  by  sacrificing  interests  which  he  is  bound  to  pro- 
tect— the  law  imposes  upon  those  who  stand  in  fiduciary  rela- 
tions the  disability  of  acquiring  interests  inconsistent  with  such 
relation.  It  does  not  inquire  whether  the  act  was  honest  or 
advantageous,  but  gives  the  protected  party  all  advantages  of 
the  act  done.  This  doctrine  is  universally  applicable  to  trustees, 
executors,  agents;  and  it  nowhere  is  of  more  forcible  applica- 
tion, than  to  nn  attorney,  purchasing  under  an  execution,  where 
the  whole  debt  is  not  paid,  8  Ohio,  552;  9  Ohio,  117;  5 
Watts,  303. 

The  case,  then,  is  one  in  which,  although  Pettibone  acted  in 


IN  THE  SUPREME  COURT  OF  OHIO.  193 

entire  good  faith,  his  clients  may  step  in,  and  claim  the  benefit 
of  his  purchase,  unless  it  was  made  with  their  assent.  He  claims 
that  assent  may  be  inferred,  after  they  did  not  answer  the  letter 
in  which  he  communicated  information  about  the  sale,  and  asked 
their  instructions.  We  do  not  intend  to  determine  whether 
such  assent  can  be  presumed  from  this  omission.  And  it  is  of 
no  consequence,  in  the  present  case,  because,  by  his  letter  of  the 
29th  of  November,  he  cheerfully  relinquished  all  benefit  of  the 
purchase  to  the  company.  This  act  was  a  recognition  of  his 
confidential  relations ;  and  it  authorized  the  company,  or  Wade, 
their  trustee  (whom,  on  this  examination,  we,  at  present,  regard 
as  identical  with  the  company),  to  demand  of  Pettibone,  to  hold 
his  rights  for  their  benefit,  and  to  be  substituted  in  his  place. 
Negotiations  were  then  opened  between  the  parties  for  the  sale 
of  the  land,  which  continued  until  April,  1837,  when  Wade  sig- 
nified his  intention  to  be  in  Delaware,  to  mature  the  arrange- 
ment, during  the  ensuing  month.  Up  to  this  time,  the  rights 
of  the.  parties  were  clear ;  and  had  an  application  been  then 
made,  we  should  have  found  no  difficulty  of  entertaining  a  suit 
to  give  the  title  to  the  plaintiff. 

But,  before  Wade,  or  the  company,  could  claim  the  benefit 
of  this  purchase,  it  is  plain,  they  must  absolve  Pettibone  from 
his  responsibilities,  and  pay  the  expenses  of  acquiring  the  title. 
Pettibone  had  a  claim  for  his  own  fees.  He  was  responsible  to 
the  master,  for  the  expenses  of  the  sale,  and  he  stood  liable  to 
the  master  for  the  immediate  adjustment  of  the  purchase-money; 
for,  although  Wade  might  elect  to  assume  the  purchase,  it  is  not 
clear  that  Pettibone  could,  even  then,  compel  them  to  take  it, 
and  certainly  not  without  litigation,  in  which  the  master  ought 
not  to  be  involved.  In  this  stage  of  the  case,  Pettibone  had  a 
right  to  expect  from  the  plaintiff  an  early  close  of  the  affair. 

Instead  of  this,  not  a  step  was  taken,  or  a  movement  made, 
toward  the  completion  of  the  purchase,  from  April,  1837,  to 
June,  1839.  During  this  period  of  twenty-five  months,  no  ef- 
fort was  made,  either  to  pay  to  Pettibone  his  just  claim1,  or  to 
release  him  from  his  responsibilities  to  the  master.  And  if  we 
may  trust  the  answer,  when,  in  the  Spring  of  1839,  the  master 
had  exacted,  from  Pettibone,  security  for  the  prompt  payment 
of  the  purchase-money,  and  when  Pettibone  visited  Cincinnati, 

13 


—194—  3.  OS"  JONES  v.  SMITH, 


in  June,  1839,  on  this  errand,  the  plaintiff  could  not  be  found. 
He,  therefore,  paid  the  money  over  to  the  company. 

The  phase,  therefore,  which  the  case  assumes,  is  not  as  to 
the  existence  of  the  original  right,  but  whether  it  has  not  been 
lost  by  delay.  This  long  slumber — this  unaccountable  and  in- 
exciisable  neglect  of  duties — seems,  to  the  Court,  a  sufficient 
answer  to  a  plaintiff  who  is  seeking,  in  chancery,  to  assert 
rights.  BILL  DISMISSED. 


CHAMBERLAYNE  JONES,  et  ux.,  v.  WILLIAM  B.  SMITH,  et  al. 

[  This  case  was  decided  in  the  High  Court  of  Errors  and  Appeals  of  the 
State  of  Mississippi,  at  the  April  term,  1857,  Associate  Justice  ALEX.  H. 
HANDY  delivering  the  opinion.  Reported  in  33  Mississipi,,2i5.] 

A  trustee  may  purchase  from  the  cestui  que  trust  the  trust  estate;  but  such  a 
transaction  will  be  regarded  with  suspicion,  and  criticised  with  the  utmost 
rigor;  and,  if  attacked  by  the  cestui  que  trust,  it  is  incumbent  on  the  trustee 
to  show  that  it  was  fair  and  just  in  all  respects,  and  consummated  on  his 
part  with  the  most  abundant  good  faith,  and  that  the  cestui  que  trust  had  all 
the  information  in  relation  to  the  trust  estate  possessed  by  the  trustee.  See 
1  Lead.  Gas.  in  Eq.  125. 

When  the  trustee  has  been  guilty  of  no  positive  act  of  fraud  in  a  purchase  made 
by  him  from  the  cestui  que  trust  of  the  trust  estate,  the  latter  will  lose  his 
right  to  annul  the  agreement,  for  want  of  the  ubrerima  fides  required  of 
trustees  in  such  transactions,  if  he  fail  to  take  steps  to  set  aside  the  con<- 
tract  in  a  reasonable  time  after  its  consummation.  In  such  a  case,  the  un- 
reasonable delay  will  be  held  to  be  a  ratification  of  the  sale  by  the  cestui , 
que  trust,  Scott  v.  Freeland,  7  Smede  and  Marshall,  419. 

The  failure  of  the  cestui  que  trust  to  take  steps  to  set  aside  a  sale  made  by  him  to 
the  trustee  of  his  trust  estate,  for  three  years  and  eight  months,  is  unrea- 
sonable, where  the  trustee  has  not  been  guilty  of  any  positive  act  of  fraud 
or  concealment. 

A  rescission  of  a  contract  will  not  be  decreed  at  the  instance  of  a  party  guilty 
of  negligence  and  unreasonable  delay  in  asserting  his  rights,  and  when 
from  a  change  of  circumstances  the  parties  can  not  be  restored  to  the  same 
3ituation  they  occupied  before  the  contract  was  made.  See  Johnson  v.  Jones, 
13  S.  and  M.  583. 

APPEAL  from  the  District  Chancery  Court  of  Holly  Springs, 
Hon.  JAMES  F.  TROTTER,  Vice-Chancellor. 

The  substance  of  the  pleadings  is  fully  set  out  in  the 
opinion  of  the  Court. 


IN  THE  MISSISSIPPI  COURT  OF  APPEALS.  195 

W.  L.  Sliarlcey  and  H.  W.  Walter,  for  appellants.  Clayton 
and  Watson,  and  Clapp  and  Strickland,  for  appellees. 

HANDY,  J.,  delivered  the  opinion  of  the  Court.  This  was  a 
bill  in  chancery,  filed  by  the  appellants,  for  the  purpose  of  set- 
ting aside  an  agreement,  made  between  the  appellant's  wife  and 
the  defendant  Smith,  under  which  the  defendants  claim  title  to 
certain  personal  and  real  estate. 

The  allegations  of  the  bill  are,  in  substance,  that  the  ap- 
pellant's wife  had  been  the  wife  of  one  S.  W.  Lewelling,  who 
died  in  Memphis,  Tennessee,  in  February,  1851,  leaving  a  will, 
by  which  he  gare  all  his  property  to  his  wife  after  the  payment 
of  his  debts,  and  appointed  the  defendant  Cheairs  his  executor; 
which  will  was  probated  in  Tennessee,  and  Cheairs  became  ad- 
ministrator there  of  the  estate,  jointly  with  one  Craddock ;  that 
the  appellants  were  married  in  November,  1853;  that  Lewel- 
ling  was  much  embarrassed,  and  in  June,  1850,  executed  a  deed 
of  trust  to  secure  certain  debts,  amounting  to  the  sum  of 
$23,489,  and  consisting  of  promissory  notes,  payable  in  one, 
two,  three,  and  four  years,  and,  to  indemnify  the  sureties  on 
these  notes,  conveying  a  tract  of  land  and  about  forty  slaves,  in 
this  state,  to  the  defendant  Smith,  as  trustee,  with  power  of  sale 
upon  default  in  the  payment  of  any  one  of  the  notes,  either  for 
the  amount  of  the  note  then  due  and  unpaid,  or  for  the  full 
amount  of  the  indebtedness,  at  the  option  of  a  majority  of  the 
creditors ;  and  if  all  the  notes  should  be  paid  without  sale,  that 
the  property  should  revert  to  Lewelling  and  his  wife ;  that  the 
debts  secured  were  partnership  debts  of  the  firm  of  Woods  & 
Lewelling,  and  that  the  property  conveyed  was  worth  at  the 
time  $33,000,  and  is  now  worth  $38,000  or  $40,000 ;  and  that 
the  value  of  the  crops  raised  on  the  plantation,  from  1850  to 
1854,  inclusive,  has  been  about  $4,000  per  annum ;  that  assets 
belonging  to  Woods  &  Lewelling,  amounting  to  about  $30,000. 
had  come  to  the  hands  of  the  defendants,  Smith  and  Cheairs, 
who  had  used  them  in  paying  the  debts  of  the  firm  of  Woods  & 
Lewelling,  which  amounted  to  but  little  besides  the  debts  secured 
in  the  trust  deed ;  that  after  the  dissolution  of  that  firm,  Lewel- 
ling continued  to  do  business  in  Memphis,  and  after  his  death,  that 
assets,  amounting  to  several  thousand  dollars,  came  to  the  hands 


196  JONES  v.  SMITH, 


of  Cheairs,  but  none  into  the  hands  of  Craddock,  his  co-adminis- 
trator; that  soon  after  Lewelling's  death,  his  widow  took  up  her 
residence  at  Cheairs's  house,  on  his  invitation,  and  she  after- 
ward proposed  to  go  to  the  plantation  of  her  deceased  husband, 
and  stay  with  the  family  of  the  overseer,  but  that  Cheairs  would 
not  consent  to  it ;  that  during  the  time  she  resided  at  his  house, 
he  gave  her  no  information  as  to  the  condition  of  the  estate, 
and  made  a  secret  arrangement,  without  her  knowledge,  with 
Smith,  to  purchase  the  entire  interest  which  she  had  in  her  hus- 
band's estate,  for  a  mere  pittance ;  that  she  was  approached  by 
persons  under  the  influence  of  Smith  and  Cheairs,  who  per- 
suaded her  to  sell  her  interest  to  them,  upon  false  representa- 
tions, to  which  she  finally  yielded,  being  destitute  and  without 
counsel,  and  under  these  circumstances,  that  she  signed  a  con- 
veyance of  her  interest,  for  the  joint  benefit  of  Smith  and 
Cheairs,  who  have  since  divided  the  property  amongst  them, 
and  are  now  in  possession  of  all  the  property  belonging  to  the 
estate  of  Lewelling;  that  before  his  death,  Lewelling  had  pur- 
chased a  lot  in  Memphis,  on  which  was  due  a  balance  of  $2,000, 
and  that  Smith  and  Cheairs,  or  Smith  alone,  agreed  to  pay  that 
balance,  and  have  the  lot  conveyed  to  her,  which  was  accord- 
ingly done ;  that  the  section  of  land  conveyed  by  the  trust  deed 
was  worth  $6,400,  and  that  she  was  entitled  to  dower  therein, 
never  having  relinquished  it,  and  that  her  dower  was  worth 
more  than  Avhat  she  received  for  her  interest  in  the  whole  es- 
tate ;  that  her  interest  in  the  estate  was  worth  $20,000  or 
$30,000,  of  which  she  had  been  defrauded  by  the  defendants ; 
that  Smith  had  advertised  the  tract  of  land  and  some  of  the 
slaves  for  sale,  under  the  trust  deed,  but  that  there  was  no 
necessity  for  such  sale,  as  the  debts  secured  by  the  deed  had 
all  been  paid  from  other  sources;  and  prays  that  the  sale  be 
enjoined. 

The  bill  charges,  that  the  consideration  paid  for  the  widow's 
interest  in  her  husband's  estate,  was  grossly  inadequate ;  that 
she  was  contracting  with  those  who  held  the  property  in  a  fidu- 
ciary capacity  for  her  benefit,  and  the  contract  was  a  fraud, 
both  in  law  and  in  fact,  Smith  and  Cheairs  being  fully  conversant 
with  the  value  of  the  property,  and  she  being  ignorant  of  its 
value ;  that  the  defendants  have  refused  a  bonus  at  one  time 


IN  THE  MISSISSIPPI  COURT  OF  APPEALS.  197 

of  $5,000,  and  at  another,  of  $G,000,  upon  their  purchase.  The 
bill  offers  to  pay  any  debts  due  the  defendants,  or  the  creditors 
of  the  estate,  and  take  the  property  and  effects,  prays  an  account, 
and  that  the  conveyance  to  the  defendants  be  set  aside. 

The  answer  of  Smith  admits  his  appointment  as  trustee  in  the 
deed,  and  states  that  at  the  time  of  Lewelling's  death,  the  debts 
thereby  secured  were  wholly  unpaid ;  that  the  contract  with  the 
widow  was  made  by  him  on  the  14th  of  June,  1851,  and  two  of 
the  notes  secured  were  to  fall  due  in  four  days  thereafter,  and 
there  was  no  money  to  meet  them  except  some  proceeds  of 
the  cotton  crop  of  1850,  and  the  creditors  were  pressing  ;  that 
there  was  little  hope  of  indulgence,  and  no  hope  of  meeting  the 
debts,  but  by  a  sale  of  the  property  ;  thai  under  these  circum- 
stances, a  person  named  Webb,  who  had  been  the  clerk  of  Woods 
and  Lewelling,  and  had  been  employed  by  the  administrators  of 
Lewelling  to  make  collections,  came  to  respondent's  house,  in 
company  with  Cheairs,  and  made  the  proposition  to  respondent 
to  purchase  ;  he  having  been  engaged  for  some  months  in  collect- 
ing, and  had  not  collected  enough  to  pay  his  wages  and  expenses, 
which  facts  he  had  previously  reported  to  the  widow,  and  had 
furnished  her  with  a  statement  of  the  condition  of  the  estate,  and 
had  advised  her  to  sell  her  interest,  all  of  which  was  done  without 
the  respondent's  knowledge  ;  that  respondent  replied  to  Webb, 
that  he  would  not  make  the  purchase  until  she  had  consulted 
some  friend ;  and  upon  this  being  made  known  to  her,  she 
desired  him  to  request  a  person  named  French  to  call  and  see 
her,  which  he  did  ;  that  he  was  afterward  informed  by  French 
of  her  intention  to  sell,  of  the  amount  she  required,  and  of  her 
request  that  respondent  would  meet  her  at  a  specified  place  ; 
that  the  meeting  took  place,  and  the  contract  was  made  upon 
the  terms  proposed  by  herself,  after  consulting  with  her  friends, 
without  any  persuation  either  by  French  or  respondent,  the  act 
being  entirely  voluntary  on  her  part ;  that  the  contract  was  entered 
into  with  respondent  alone,  Cheairs  not  having  taken  part  in  it 
until  some  days  after  its  completion ;  that  afterward,  when  the 
agreement  was  about  to  be  consummated,  by  conveying  the  lot 
to  her,  he  told  her,  that  if  she  was  not  entirely  satisfied,  he  was 
willing  to  let  it  all  drop,  and  she  expressed  herself  entirely  satis- 
fied, and  the  agreement  was  then  consummated.  He  insists  that 


198  JONES  v.  SMITH, 


the  price  paid  for  the  property  was  fully  its  value,  under  the  cir- 
cumstances ;  and  that,  besides  the  trust  debts,  he  and  his  co- 
defendant  have  paid  some  seven  or  eight  thousand  dollars  more 
than  was  collected  from  the  assets  of  the  estate,  making  about 
$31,430  paid  by  them  for  the  property  ;  that  the  settlement  of 
Cheairs  with  the  proper  court  in  Tennessee,  of  his  administration, 
shows  that  he  is  in  advance  to  the  estate,  $3,808  ;  and  that  in  a 
suit  between  Cheairs  and  Woods,  the  partner  of  Lewelling,  for  a 
settlement  of  the  partnership,  it  appears  that  Cheairs,  as  adminis- 
trator of  Lewelling,  had  paid  out  for  debts  and  expenses,  $15,380 
more  than  he  had  collected  of  the  assets  of  the  firm.  He  admits 
the  advertisement  of  the  land  and  some  of  the  slaves,  for  sale, 
under  the  deed  of  trust,  but  states  that  the  object  of  it  was  merely 
to  pass  the  title  to  the  property  by  sale  under  the  trust  deed. 
He  admits  that  the  debts  of  Lewelling  have  been  paid,  or  assumed 
by  himself  and  Cheairs,  and  that  Craddock  offered  him  a  premium 
of  $3,000  for  his  interest  in  the  purchase,  which  he  declined. 
He  states  that  the  house  and  lot,  conveyed  as  the  consideration 
for  the  purchase  of  the  widow's  interest,  was  sold  by  her  and 
her  present  husband,  the  appellants,  for  the  sum  of  $5,000,  which 
took  place  in  September,  1854,  and  relies  on  the  statute  of 
limitatibns  as  a  defense. 

The  answer  of  Cheairs  is  to  the  same  effect  as  that  of  Smith. 

An  amended  bill  was  afterward  filed,  attempting  to  charge 
the  defendants  with  large  assets,  besides  those  embraced  in  the 
trust  deed,  arising  from  the  firms  in  Memphis,  in  which  Lewel- 
ling was  a  partner,  denying  that  the  settlement  of  Cheairs  as 
administrator  in  Tennessee  was  binding  upon  the  appellants,  or 
that  they  were  affected  by  the  settlement  in  the  chancery  suit, 
not  being  parties  to  those  proceedings ;  alleging  that  the  widow 
was  absent  from  this  state  after  the  contract  was  made,  and  igno- 
rant of  the  fraud  practiced  upon  her,  and  that  this  suit  was  com- 
menced as  soon  as  the  fraud  was  discovered,  and  charging  that 
there  was  a  tract  of  land  in  Virginia,  worth  $2,000,  of  which  sh<* 
had  no  knowledge,  and  of  which  the  defendants  were  aware  at 
the  time  of  sale,  and  have  since  received  rents. 

The  answers  of  the  defendants  deny  the  material  parts  of  the 
amended  bill,  and  as  to  the  land  in  Virginia,  state  that  they  knew 
nothing  of  it  except  what  was  derived  from  a  letter  shown  to 


IN  THE  MISSISSIPPI  COURT  OF  APPEALS.  199 

Cheairs  by  the  appellant's  wife,  shortly  after  Lewelling's  death, 
are  ignorant  of  its  value  or  extent,  and  have  not  sold  or  rented  it, 
nor  receive  any  rent  for  it. 

Upon  the  final  hearing,  the  bill  was  dismissed  ;  and  from  that 
decree  the  complainants  took  this  appeal. 

The  first  position  taken  in  support  of  the  bill  is,  that  the 
purchase  having  been  made  by  the  trustee  from  the  cestui  que 
trust,  must  be  set  aside,  as  of  course,  upon  the  motion  and  at  the 
option  of  the  cestui  que  trust,  however  fairly  it  may  have  been 
made. 

The  rule  that  purchases  of  the  trust  property  by  trustees  at 
their  own  sales,  may  be  set  aside  as  of  course,  at  the  election  of 
the  cestui  que  trust,  and  a  resale  ordered,  is  sanctioned  by  many 
authorities.  But  this  right  does  not  exist  to  the  same  extent  in 
cases  of  purchases  by  the  trustee  directly  from  the  cestui  que  trust 
as  when  the  purchase  is  made  by  the  trustee  at  his  own  sale.  In 
such  cases  the  rule  is,  that  the  trustee  is  not  under  an  absolute 
disability  to  make  the  purchase ;  but  that  it  will  be  regarded 
with  suspicion,  and  that  it  is  incumbent  on  the  trustee  to  show 
that  it  was  in  all  respects  just  and  fair,  and  with  the  most  abund- 
ant good  faith  on  his  part,  and  the  fullest  deliberation  upon  the 
part  of  the  cestui  que  trust,  with  the  aid  of  all  the  information 
possessed  by  the  trustee  touching  the  subject,  and  which  it  was 
his  duty  to  communicate.  1  Lead.  Cases  in  Eq.  125  ;  and  the 
numerous  cases  in  the  notes,  1 50. 

It  is  next  insisted  that,  under  the  rule  thus  stated,  this  sale 
can  not  stand,  because  the  defendants  have  not  only  failed  to  show 
that  fairness  and  good  faith  which  are  required,  but  the  evidence 
shows  a  positive  advantage  taken  of  the  cestui  que  trust  by  the 
trustees  in  making  the  purchase.  The  circumstances  relied  upon 
as  showing  that  an  undue  advantage  was  taken  of  the  widow  in 
the  transaction  are,  her  destitute  and  distressed  condition,  her 
ignorance  of  the  state  of  her  husband's  affairs,  complicated  as 
they  were,  and  of  the  value  of  his  property  and  means,  and  even 
the  amount  of  his  property ;  the  failure  of  Smith,  who  was 
trustee  under  the  trust  deed  in  which  she  was  interested,  and  of 
Cheairs,  who  was  administrator  of  the  estate  of  which  she  was 
residuary,  legatee,  to  obtain  and  impart  full  and  accurate  informa- 
tion as  to  the  condition  of  the  estate,  if  indeed,  they  were  not 


200  JONES  v.  SMITH, 


actually  apprised  that  it  was  of  much  greater  value  than  the 
amount  of  the  debts  agreed  to  be  paid  by  Smith  in  making  the 
purchase  ;  and  lastly,  the  inadequacy  of  the  consideration  paid, 
to  the  real  value  of  the  interest  in  the  property  conveyed. 

Upon  these  points  many  witnesses  were  examined,  and  the 
testimony  is  very  voluminous.  But  the  particulars  principally 
relied  upon  as  showing  that  a  fraud  was  practised  in  procuring 
the  sale  are,  the  circumstances  under  which  the  widow  of  Lewel- 
ling  was  advised  to  make  the  sale,  the  fact  that  Smith  and 
Cheairs  were  both  interested  in  the  transaction,  though  conducted 
in  the  name  of  Smith  alone,  and  that  they  were  aware  that  they 
were  making  a  speculation  at  the  time. 

There  appears  to  be  nothing  in  the  evidence  in  relation  to  the 
means  employed  to  induce  Mrs.  Lewelling  to  make  the  sale,  to 
justify  the  charge  that  it  was  the  result  of  fraudulent  represen- 
tations, or  that  there  was  a  combination  for  sueii  a  purpose 
between  Smith  and  Cheairs.  It  was  first  proposed  to  her  by 
Webb,  who  stood  indifferent  between  the  parties,  and  who  was 
intimately  acquainted  with  the  affairs  of  the  estate,  having  been 
clerk  for  Lewelling  in  his  life-time,  and  having  been  engaged  for 
several  months  before  the  sale  in  collecting  the  debts  due  to  the 
estate.  He  had  previously  furnished  her  with  a  statement  of  the 
condition  of  the  estate,  and  now,  upon  full  conference  with  her, 
advised  her  to  sell  if  she  could  get  $5,000  for  her  interest,  believ- 
ing that  her  interest  was  not  worth  more  than  that  sum.  She 
was  at  first  disinclined  to  sell,  but  changed  her  mind  upon  his 
representations,  and  desired  him  to  request  French  to  call  and 
see  her.  He  did  so,  and  she  consulted  with  French  as  her  friend, 
and  he  advised  her  to  sell,  as  Webb  had  done.  Webb  first  men- 
tioned the  subject  to  Smith  of  his  own  accord,  who  declined  mak- 
ing the  purchase  unless  she  was  advised  to  sell  by  some  friend, 
and  stated,  that  if  it  was  proposed  to  him  after  such  consultation, 
he  would  consider  it.  After  consultation  with  French,  she  author- 
ized him  to  propose  the  sale  to  Smith,  which  he  did,  and  it  was 
accordingly  made  by  him  for  her.  Some  time  after  this,  and 
when  the  agreement  was  about  to  be  consummated,  Smith  stated 
to  her  that  she  might  abandon  it,  unless  she  was  entirely  satisfied 
with  it ;  and  desired  her  to  consult  her  friends  upon  the  subject. 
She  replied  that  she  was  entirely  satisfied,  stating  that  it  might 


IN  THE  MISSISSIPPI  COURT  OF  APPEALS.  201 

be  doubtful  whether,  after  the  lapse  of  several  years,  she  would 
get  any  thing,  after  settling  up  the  liabilities  of  the  estate. 

In  addition  to  the  probability  that  but  little  of  the  estate  would 
be  left  after  paying  the  debts,  as  was  the  opinion  of  Webb  and 
French,  who  were  well  acquainted  with  its  condition,  there  was 
strong  reason  to  believe,  that  the  property  would  have  to  be  sold 
under  the  trust  deed  for  the  notes  secured  thereby,  and  which 
were  about  falling  due  when  the  sale  was  made ;  and  she  was 
anxious  that  the  property,  which  consisted  mostly  of  family  slaves, 
should  not  be  sold  and  separated.  She  therefore  preferred  that 
they  should  be  sold  together  to  Smith,  and  thereby  prevented 
from  being  "  scattered,"  by  being  sold  under  the  trust  deed, 
which  appeared  to  be  inevitable,  unless  the  arrangement  with 
Smith  had  been  effected  ;  and  this  appears  to  have  been  a  con- 
trolling motive  with  her  in  disposing  of  her  interest  and  making 
the  arrangement  with  Smith. 

It  is  true  that  the  evidence  justifies  the  belief  that  Smith  and 
Cheairs  were  both  interested  in  the  purchase  when  it  was  made, 
and  that,  for  some  reason,  which  does  not  sufficiently  appear,  the 
name  of  Cheairs  did  not  appear  in  it.  But  it  does  not  appear, 
that  any  influence  or  undue  means  was  exerted  by  either  of  them 
to  induce  her  to  make  the  arrangement,  or  that  they  had  a  better 
knowledge  of  the  condition  of  the  estate  than  Webb,  who  had 
been  so  intimately  connected  with  it,  or  that  they  refused  to  give 
her  such  information  upon  the  subject  as  they  possessed. 

There  is  much  testimony  with  respect  to  the  value  of  the 
property  and  assets  of  the  estate,  and  considerable  disagreement 
between  the  witnesses  for  the  respective  parties  as  to  the  value 
of  the  slaves  in  the  trust  deed  and  the  choses  in  action  of  the 
estate.  The  estimated  value  relied  upon  by  each  party  appears 
to  be  sustained  by  the  witnesses  examined  by  them  respectively ; 
and  under  such  a  state  of  disagreement  of  witnesses,  we  can  not 
say  that  the  court  below  erred  in  adopting  the  valuation  proved 
by  the  witnesses  for  the  defendants,  who  are  not  only  unira- 
peached,  but  are  shown  to  have  had  opportunities  to  form  reliable 
opinions  upon  the  subject. 

But  there  is  a  circumstance  shown  by  the  testimony,  tending 
to  cast  suspicion  upon  the  purchase  of  the  defendants,  with  refer- 
ence to  the  value  of  the  interest  of  Mrs.  Lewelling  in  the  estate. 


202  JONES  v.  SMITH, 


It  is  proved  that  shortly  after  the  arrangement  was  made,  Smith 
stated  that  he  had  made  a  trade  with  Mrs.  Lewelling  by  which 
he  and  Cheairs  would  clear  $10,000.  He  also  declined  an  offer 
made  him  by  Craddock,  shortly  after  the  trade,  of  $3,000  for  a 
third  interest  in  it.  He  also  refused  an  offer  of  $5,000  for  the 
bargain,  made  by  another  person  shortly  after  the  trade. 

It  is  true  that  these  facts  would  not  of  themselves  be  sufficient 
generally  to  set  aside  a  contract  on  the  ground  of  gross  inade- 
quacy of  price,  nor  would  they  be  sufficient  to  show  fraud  in 
procuring  the  sale.  The  hazard  of  taking  the  property,  and,  as 
a  consideration,  undertaking  to  pay  all  the  debts  of  the  estate, 
might  be  a  risk  which  would  justify  the  purchase  of  the  widow's 
interest  in  the  estate,  if  the  relation  of  trustee  and  cestui  que 
trust  had  not  existed  between  them,  for  there  would,  in  such 
case,  be  no  such  evidence  of  fraud,  and  no  such  gross  inadequacy 
of  consideration  as  to  vitiate  and  annul  the  contract.  But  when 
the  relation  of  trustee  and  cestui  que  trust  exists  between  the 
parties,  it  is  the  duty  of  the  trustee  to  show  that  he  gave  all  the 
information  in  his  possession  to  the  cestui  que  trust,  and  that  he 
took  no  advantage  whatever  of  his  superior  knowledge  in  relation 
to  the  value  of  the  estate ;  and  unless  all  suspicion  against  the 
openness  and  fairness  of  his  conduct  be  removed,  the  sale  will  be 
vacated  at  the  election  of  the  cestui  que  trust.  Although,  in  this 
case,  the  value  of  the  purchase,  as  acknowledged  by  Smith,  may 
have  been  based  upon  a  calculation  .of  the  prospective  profits  to 
be  derived  from  the  use  of  his  capital  and  industry  to  be  employed 
upon  the  property,  yet,  under  the  stringent  rule  applicable  to 
cases  of  this  nature,  his  acknowledgments  as  to  the  value  of  the 
purchase  would  tend  strongly  to  show  that  the  consideration  paid 
was  greatly  less  than  what  he  believed  its  value  at  the  time  ;  and 
we  should  be  inclined  to  hold,  that  on  this  ground,  the  sale  can 
not  be  sustained,  if  there  was  nothing  else  in  the  case  to  show,v 
that  upon  principles  of  equity  it  should  not  be  set  aside.  This 
brings  us  to  consider  the  only  other  point  which  we  deem  it 
necessary  to  notice  (a). 

(a)  Thus  far  no  objection  can  be  taken  to  the  rulings  of  the  court.  They  are 
in  full  harmony  with  those  of  the  recognized  authorities  on  the  points  considered. 

It  is  expressly  stated  in  the  report,  that  the  statute  of  limitation  was  plead 
by  the  defendants.  On  reference  to  the  laws  of  Mississippi  (edition  of  1839,  page 


IN  THE  MISSISSIPPI  COURT  OF  APPEALS.  203 

It  appears  that  no  step  was  taken  by  the  appellants  to  dis- 
affirm the  contract  until  this  bill  was  filed,  which  was  not  done 
until  the  lapse  of  three  years  and  about  eight  months,  after  the 
date  of  the  purchase.  And  in  September,  1854,  more  than  three 
years  after  the  contract  was  made,  the  appellants  sold  the  house 
and  lot  in  Memphis,  conveyed  by  Smith  to  Mrs.  Lewelling,  to  a 
third  person  for  the  sum  of  $5,000. 

It  has  been  held  by  this  Court,  that  the  cestui  que  trust,  in  cases 
of  this  character,  may  elect  to  treat  the  sale  as  valid,  and  that 
such  election  will  be  implied  from  any  unreasonable  delay  in 

556),  it  is  found  that  actions  for  the  recovery  of  real  estate  must  be  brought  within 
twenty  years,  and  "actions  on  the  case,"  other  than  slander,  shall  be  brought  within 
six  years.  As  equity  follows  the  law,  where  the  statute  is  plead,  those  periods  of 
times,  respectively,  would  govern.  There  was  no  provision  in  the  statute,  at  that 
time,  similar  to  the  one  now  common,  limiting  actions  for  relief  on  the  around  of 
fraud  to  five  or  six  years,  and,  consequently,  this  case  came  within  the  provision 
of  the  twenty-year  rule,  so  far  as  the  real  estate  was  concerned,  and  the  six-year  rule 
as  to  the  personality.  See  the  authorities  following. 

But  the  court  does  not  base  its  decision  upon  the  statute  of  limitation  barring 
the  suit,  but  upon  an  implied  confirmation  by  lapse  of  time,  and  from  the  other  cir- 
cumstances of  the  case.  The  widowhood  of  Mrs.  Jones  did  not  protect  her  from 
the  ruling  of  the  statute,  but  she  was  entitled  to  know  from  the  executors  of  her 
husband's  estate,  the  correct  condition  of  its  affairs,  and  if,  under  improper,  however 
honest,  advice,  she  makes  a  hasty  or  improvident  bargain,  she  is  entitled  to  have 
that  beneficent  rule  of  equity  applied  to  her  case,  that  such  transactions  will  be 
presumed  to  be  fraudulent,  and  she,  like  the  heir  coming  of  full  age,  be  entitled  to 
relief  on  applying  to  a  court  of  equity  within  a  reasonable  time,  to  wit:  the 
periods  limiting  similar  actions  at  law. 

Ashhursts  Appeal,  60  Penn.  290.  (See  cases  cited  by  the  court  on  p.  315.) 
This  was  a  suit  for  personalty,  decided  in  1869.  Onjp.  316,  the  opinion  of  the  court 
is  stated  on  the  point  of  acquiescence,  and  decided  in  favor  of  defendants  by  analogy 
to  the  statute  of  limitations  of  six  years.  [Purdon's  Digest  of  Laws  of  Pennsyl- 
vania, 655,  sec.  16,  provides  that  actions  on  the  case  (other  than  slander,  etc.)  for 
account,  detinue,  debt,  etc.,  shall  be  brought  in  six  years.]  Judge  STRONG  p.  316: 
"  For  myself,  I  think  that  where  a  party  claims  to  hold  another  a  trustee  of  per- 
sonal property  under  a  constructive  trust,  he  must  assert  the  claim  within  six 
years  from  the  time  the  trust  is  alleged  to  have  originated,  in  analogy  to  the  statute 
of  limitations."  In  this  case,  the  suit  was  brought  seven  years  and  near  four 
months  after  the  cause  of  action  arose. 

Clegg  v.  Edmondson,  8  De  Gex,  M'Naughton  &  Gordon,  787.  This  case,  also, 
decided  for  defendants  on  the  point  of  acquiescence:  the  suit  was  for  a  share  of  the 
profits  of  coal-mines,  and  admitted  defendants  were  constructive  trustees;  the  suit 
was  brought  nine  years  after  cause  of  action  arose.  (P.  814.) 

Jordan  v.  Morney,  5  H.  L.  C,  185  :  "Where  a  party  possesses  a  legal  right,  a 
court  of  equity  will  not  interfere  to  restrain  him  from  enforcing  it,  though,  between 
the  time  of  its  creation  and  that  of  his  attempt  to  enforce  it,  he  has  made  repre- 
sentations of  his  intention  to  abandon  it.  Nor  will  equity  interfere  even  though 


204  JONES  v.  SMITH, 


taking  steps  to  set  it  aside.  Scott  v.  Freeland,  7  Smede  and 
Marshall,  419.  In  that  case,  the  delay  of  an  heir  for  about  one 
year  after  his  majority,  to  institute  his  suit  to  set  aside  a  sale, 
made  by  the  trustee  to  himself  during  the  heir's  minority,  was 
held  sufficient  to  prejudice  his  right,  and  the  sale  was  not  set 
aside  upon  his  application.  In  this  case,  the  delay  was  much 
greater.  For  ought  that  appears,  the  facts  relied  upon  to  show 
that  an  undue  advantage  was  taken  of  the  widow,  might  have 
been  ascertained  at  any  time  after  the  sale,  by  proper  investiga- 
tion and  vigilance.  She  remained  a  widow  until  November, 

the  parties  to  whom  these  representations  were  made  have  acted  on  them,  and 
have,  in  full  belief  in  them,  entered  into  irrevocable  arrangements.  To  raise  an 
equity  in  such  caW,  there  must  be  a  misrepresentation  of  existing  facts,  and  not 
of  mere  intention." 

Hawley  v.  Cramer,  4  Cowan,  734  (1835).  A  suit  in  equity  arising  between 
creditors.  One  party  alleged  that  the  other  got  more  than  their^shares,  and  held 
such  interest  as  trustees.  This  view  was  sustained  by  the  court.  "The  shortest 
period  which  a  court  of  equity  is  bound  to  consider  an  absolute  bar  to  a  suit 
respecting  real  estate,  in  analogy  to  the  limitation  of  actions  at  law,  is  twenty 
years."  In  cases  of  implied  trusts,  relating  to  personal  property,  or  to  the  rents 
and  profits  of  real  estate,  where  persons  claiming  in  their  own  right  are  turned 
into  trustees,  by  implication,  the  right  in  equity  will  be  considered  barred  in  six 
years.  Lapse  of  time  was  set  up  as  a  defense,  and  held  that  a  few  days  longer 
would  have  barred,  as  the  six  years  would  have  run  out  from  the  time  the  action 
accrued. 

The  case  of  Butler  v.  Haskell,  4  Dessaus.  (S.  C.),  702.  contains  a  thorough 
examination  and  citation  of  authorities  on  the  question  of  confirmation.  From  p. 
708,  where  it  is  said  "deeds  of  confirmation"  were  taken  by  defendant  from 
plaintiff's,  to  p.  715,  numerous  cases  are  cited  where  confirmation  or  acquiescence 
were  disallowed  for  various  reasons  not  good  in  equity.  This  suit  was  brought 
eleven  years  after  the  original  cause  of  action  arose.  In  1804  the  first  contract 
wassigned  for  ten  percent  on  the  estate  for  services;  and  on  making  inquiries, 
the  defendant  bought  the  right  of  the  heirs.  The  other  agreement  for  sale  was 
made  the  same  year.  The  suit  was  sustained. 

The  only  possible  difficulty  in  granting  the  relief  prayed  for  in  Jones  v.  Smith, 
arises  from  the  fact  of  the  plaintiffs  having  disposed  of  the  house  and  lot  conveyed 
by  defendant  Smith  to  Mrs.  Jones — thus  rendering  it  impossible  to  put  Smith  in 
the  same  condition  he  was  before  his  purchase  of  the  trust  estate.  But  this 
difficult,  point  is  not  at  all  considered  by  Judge  HANDY;  and  passing  it  over, 
bases  his  decision  upon  the  erroneous  rule  of  confirmation.  However  difficult  it 
may  have  been,  a  court  of  equity  can  always  shape  its  decrees  so  as  to  do  substan- 
tial justice  in  the  premises  ;  and  if  Smith  could  not.  have  been  reinstated  as  before 
his  speculation  in  the  trust  fund,  surely  his  co-defendant.  Cheairs,  could  have 
been.  As  to  him,  there  could  not  have  been  any  objection  to  relief  on  thris  score. 

See  as  to  CONFIRMATION,  Hoffman  Coal  Company  v.  Cumberland  Company,  pre- 
ceding p.  96,  and  note  (a)  on  p.  98.  Also,  notes  to  Follansbev.  Kilbreth,  preceding 
page  189.  Also,  notes  to  pages  38  and  72  preceding. 


IN  THE  MISSISSIPPI  COURT  OF  APPEALS.    C       *-205 


1853,  resting  under  the  advice  given  by  her  friends,  French  and 
"Webb,  under  which  she  had  acted.  If  her  forlorn  condition 
during  that  interval,  could  constitute  a  sufficient  excuse  for  her 
want  of  diligence,  that  reason  ceased  upon  her  marriage  to  the 
appellant  Jones,  after  which  there  was  no  excuse  for  want  of 
diligence,  in  inquiring  into  the  transaction  and  asserting  their 
rights.  Yet  there  was  no  effort  made  to  investigate  the  matter 
until  about  twelve  months  after  the  marriage,  and  this  suit  was 
not  brought  until  the  lapse  of  about  fifteen  months  after  that 
time.  During  all  this  time,  no  act  on  the  part  of  the  defendants 
is  shown  calculated  to  prevent  inquiry,  or  to  lull  the  appellants 
into  security,  or  to  conceal  the  true  nature  of  the  transaction. 
On  the  contrary,  they  appear  to  have  declared  openly  their 
views  of  the  transaction,  inasmuch  that  these  declarations,  which 
appear  to  have  been  fully  and  frequently  made,  are  the  strongest 
circumstances  turned  to  their  prejudice.  Under  such  circum- 
stances, the  failure  of  the  appellants  to  prosecute  their  rights  for  . 
so  great  a  length  of  time,  must  preclude  them  from  impeaching 
the  sale,  and  amount  in  law  to  a  ratification  of  it,  Scott  v.  Free- 
land,  7  S.  and  M.  419  ;  Ay  res  v.  Mitchell,  3  Ib.  683. 

There  may  be  circumstances  of  gross  fraud  and  imposition, 
which  would  form  an  exception  to  this  rule,  and  justify  the  court 
in  Holding  that,  under  the  peculiar  circumstances  of  fraud  and 
oppression,  the  guilty  party  was  entitled  to  no  indulgence.  But 
there  is  no  evidence  to  bring  this  case  within  such  a  rule,  no 
proof  of  positive  fraud  or  undue  influence  practiced  by  the 
defendants  upon  Mrs.  Lewelling  ;  the  sale  appears  to  have  been 
freely  and  voluntarily  made  by  her,  not  through  the  influence  or 
solicitations  of  the  defendants,  but  under  the  advice  of  her  own 
friends,  and  upon  her  own  proposition  ;  and  entered  into  by  the 
defendants  as  a  speculation,  in  which  they  took  the  hazard,  and  from 
which  they  expected  by  diligence  to  realize  a  handsome  profit. 

We  think,  therefore,  that  the  case  comes  fully  within  the  rule 
stated  in  Jolmson  v.  Jones,  13  Smede  and  Marshall,  583,  —  that 
if  the  party  seeking  to  rescind  has  been  negligent,  and  there  has 
been  a  change  of  circumstances  in  any  material  particulars,  a 
rescission  should  not  be  decreed. 

And  under  this  view  of  the  case,  the  decree  is  correct,  and 
must  be  affirmed. 


206  — i )  3  THE  M'INTIRE  WILL  CASE, 


THE  TRUSTEES  OF  THE  M'INTIRE  POOR-SCHOOL  v.  THE  ZANES- 
VILLE  CANAL  AND  MANUFACTURING  COMPANY,  et  al  (a). 

[  This  case  was  decided  in  the  Supreme  Court  of  Ohio,  at  the  December 
term,  1839,  EBENEZER  LANE,  Chief  Justice,  REUBEN  WOOD,  PETER 
HITCHCOCK,  and  FREDERICK  GRIMKE,  Judges,  the  Chief  Justice  delivering 
the  opinion.  Reported  in  9  Ohio,  203.] 

A  bequest  for  charitable  uses,  where  the  objects  are  sufficiently  defined,  and  the 
person  designated  as  trustee  acquires  a  capacity  to  hold  by  subsequent  act 
of  incorporation,  takes  effect  as  an  executory  devise. 

(a)  The  report  occupies  eighty-seven  pages  of  printed  matter.  At  the  time  of  its 
decision  it  was  considered  a  noted  case,  and  since  has  been  referred  to  as  the 
leading  authority  on  the  points  of  law  and  equity  passed  upon  therein.  The 
facts  upon  which  the  questions  arose  are  shortly  these:  On  tfie  18th  of  March, 
1815,  John  M'Intire,  of  Zanesville,  by  his  will,  after  devising  certain  of  his  per- 
sonal property  to  his  wife,  authorizes  his  executors  to  sell  the  remainder,  and  all 
his  real  estate  (except  that  situate  in  Zane's  Grant,  which  was  to  be  sold  by  them 
after  his  wife's  death),  and  to  vest  the  proceeds  in  stock  of  the  Zanesville  Canal 
and  Manufacturing  Company,  and  to  pay  his  wife  annually  during  her  life  half 
the  profits  of  all  his  estate,  real  and  personal.  On  the  death  of  his  wife,  the 
executors  are  to  sell  his  remaining  real  estate,  except  his  mansion-house,  and 
vest  the  proceeds  in  the  same  stock.  He  next  devises  to  his  daughter  (his  only 
child)  his  mansion-house,  after  the  death  of  his  wife,  in  fee  simple,  provided  she 
leaves  an  heir  of  her  body,  and  to  her  and  the  heirs  of  her  body,  all  the  rents, 
issues,  interest,  and  profits  of  the  stock,  to  be  paid  to  her  annually  during  her 
life,  by  the  president  and  directors  of  the  company.  The  will  then  proceeds  aa 
follows:  "But  should  my  daughter,  Amelia  M'Intire,  otherwise  called  Amelia 
Messer,  die  without  an  heir  or  heirs  of  her  body,  then  my  house  and  lot,  with  the 
premises,  as  before  described,  are  to  be  held  in  fee  simple  by  the  company  before 
described,  for  the  use  and  occupancy  of  the  president  of  said  company,  he  paying 
into  the  fund  aforesaid,  for  the  use  hereinafter  described,  a  reasonable  rent,  to  be 
fixed  by  the  directors  of  the  same;  and  the  president  and  directors  of  said  com- 
pany are  annually  forever  to  appropriate  all  the  profits,  issues,  and  rents  of  my 
stock,  as  aforesaid,  and  all  my  estate  of  whatever  kind  the  same  may  be,  for  the 
use  and  support  of  a  poor-school,  which  they  are  to  establish  in  the  town  of 
Zanesville  for  the  use  of  the  poor  children  of  said  town ;  the  children  who  are  to 
be  the  object  of  this  institution  are  to  be  fixed  upon  by  the  president  and  direct- 
ors of  said  company."  The  testator  died  in  July,  1815,  and  his  daughter  Amelia 
died  in  December,  1820,  without  issue.  His  widow,  who  was  amply  provided  for 
by  the  will,  intermarried  with  David  Young,  in  August,  1816.  They  interpose 
this  plea,  claiming  that  the  charity  is  invalid  by  reason  of  there  being  no  com- 
petent trustee  designated  by  the  testator,  and  that  Mrs.  Young  is  entitled  to  the 
fund  intended  for  the  charity,  as  heir  at  law  of  the  testator.  The  plea  does  not 
show,  nor  does  it  anywhere  appear  in  the  case,  how  Mrs.  Young  is  heir  at  law. 


IN  THE  SUPREME  COURT  OF  OHIO.  207 

The  modes  by  which  a  private  corporation  in  our  country  is  dissolved,  are,  1.  By 
the  death  of  its  members;  2.  Surrender  of  its  franchises;  and  3.  A  judgment 
of  forfeiture  for  non-use  or  abuse. 

A  legislative  act  reciting  that  a  corporation  trustee  had  lost  its  rights,  and  author- 
izing a  purchase  for  the  state  of  its  property,  is  a  recognition  of  its  existence 
as  a  corporation  capable  of  contracting. 

BILL  IN  CHANCERY.  From  Muskingum.  The  plaintiffs, 
Peter  Mills  and  others,  claiming  to  be  the  lawful  trustees  of  a 
charitable  fund  created  by  the  will  of  John  M'Intire,  bring  this 
bill  against  the  Zanesville  Canal  and  Manufacturing  Company, 
the  executors  of  M'Intire,  and  D.  Young  and  wife,  late  the  widow 
of  M'Intire,  who  hold  or  claim  the  estate,  for  an  account.  The 
case  comes  on  upon  a  demurrer  and  answer  of  the  Canal  Com- 
pany, and  of  the  executors  of  M'Intire,  and  on  a  plea  by  the 
other  defendants.  Young  and  wife  deny  the  validity  of  the  be- 
quest, and  set  up  a  right  to  the  estate  as  heirs.  The  Canal 
Company  and  the  executors  hold  under  the  trust,  and  assert 
that  its  execution  was  committed  to  them  by  the  will,  and  that 
it  has  been  thus  far  faithfully  administered. 

In  1812,  an  act  was  passed  to  enable  John  M'Intire  and  his 
associates  to  erect  a  dam  over  the  Muskingum  River,  10  0.  L. 
173.  The  preamble  recites  as  the  objects,  "that  great  advan- 
tages for  water-works  would  be  secured,  and  the  navigation  of 
the  river  improved.''  The  law  authorizes  M'Intire  and  his  as- 
sociates to  construct  the  dam  in  certain  specified  forms,  cut  a 
canal,  and  build  a  lock  adapted  to  the  passage  of  boats ;  to  col- 
lect tolls;  to  condemn  any  adjoining  land  which  they  may  "find 
necessary  for  the  purpose  of  making  said  canal,  or  any  part 
thereof,  the  better  to  answer  the  objects  of  this  act "  and  it 
renders  them  liable  to  the  suit  of  any  person  injured  by  their 
neglect. 

In  1824,  the  association  called  the  Zanesville  Canal  and 
Manufacturing  Company  was  formed  under  this  act,  with  pro- 
vision for  a  capital  of  $250,000,  divided  into  shares  of  $500 
each,  and  prescribing  the  manner  of  conducting  the  business  of 
the  company.  One  hundred  and  eighty-six  shares  of  stock 
were  subscribed,  of  which  eighty-eight  were  held  by  M'Intire 
in  his  own  right.  The  company  was  organized  under  these  ar- 
ticles of  association ;  officers  were  appointed,  and  business  com- 
menced and  continued  to  improve  the  navigation  of  the  Mus- 


208  THE  M'INTIRE  WILL  CASE, 

kingum  River  between  Dresden  and  its  mouth.  By  the  27th 
section  of  the  act  of  incorporation,  the  time  for  the  company  to 
complete  their  dam,  lock,  and  canal,  was  extended  until  the  llth 
day  of  February,  1835,  and  upon  their  failure,  within  this  ex- 
tended period,  the  Muskingum  Navigation  Company  were  au- 
thorized to  finish,  take  possession  of  the  work,  and  hold  it,  until 
the  money  expended,  and  the  interest  accruing  upon  it,  with  ten 
per  cent  in  addition,  should  be  repaid  from  its  profits.  The 
dam,  lock,  and  canal,  were  not  completed  within  the  time  ex- 
tended by  the  last  cited  section  ;  and  such  forfeiture  was  in- 
curred, by  this  failure,  as  it  was  intended  to  impose.  On  the 
19th  of  February,  1835,  a  law  was  passed  a  authorizing  the 
canal  commissioners  to  take  possession  of  certain  property  for 
the  use  of  the  State,"  33  0.  L.  L.  90.  After  reciting  that  the 
Zanesville  Canal  and  Manufacturing  Company  had  lost  its  Bights 
to  construct  the  canal  and  locks,  by  non-executioft  within  time, 
it  provides  for  the  purchase  from  them  of  the  real  estate  neces- 
sary for  the  dam,  canal,  and  the  profitable  use  of  the  water,  by 
the  State,  and  for  the  ratification  of  existing  laws.  In  the  event 
of  inability  to  make  the  purchase,  it  authorizes  the  canal  com- 
missioners to  enter  and  take  possession  of  the  land  necessary  for 
the  canal,  locks,  dam,  and  profitable  use  of  the  water-power. 

In  March,  1836,  an  act  was  passed  by  the  Legislature  of 
Ohio,  "to  incorporate  the  M'Intire  Poor-school."  After  reciting 
that  property  had  been  devised  for  this  purpose,  to  be  managed 
by  the  Zanesville  Canal  and  Manufacturing  Company,  as 
trustees,  and  that  it  it  had  been  represented  that  that  company 
had  ceased  to  exist,  so  that  no  persons  are  competent  to  exe9ute 
the  trusts,  it  creates  a  corporation  of  five  trustees,  and  confers 
the  necessary  powers  to  carry  the  devise  into  effect:  "Provided, 
that  nothing  contained  in  this  act  shall  be  so  construed  as  to 
affect  the  private  or  corporate  rights  of  any  person  or  persons,  or 
change  the  will  of  the  said  John  M'Intire ;  but,  on  the  contrary, 
to  carry  into  effect  the  true  intent  and  meaning  thereof." 

The  Zanesville  Canal  and  Manufacturing  Company,  organ- 
ized under  the  articles  of  1812,  and  accepting  the  charter  of 
1816,  has  in  fact  continued  an  organized  and  existing  corpora- 
tion until  this  time,  managing  its  own  and  the  M'Intire  property, 
and  exercisiug  its  corporate  functions. 


IN  THE  SUPREME  COURT  OF  OHIO.  200 

The  plaintiffs  are  the  corporation  created  by  the  act  of  183G' 
and  they  bring  this  bill  as  well  against  the  Zanesville  Canal  and 
Manufacturing  Company,  as  against  the  executors  and  the  heirs 
of  M'Intire,  to  ascertain  and  declare  the  trust,  and  to  carry  it  into 
effect.  A  demurrer  to  the  bill  having  been  overruled,  the  case 
stands  for  hearing  in  this  Court,  upon  the  demurrer  of  the 
Zanesville  Canal  and  Manufacturing  Company,  and  of  the  ex- 
ecutors of  M'Intire,  contesting  the  plaintiffs'  right  to  the  account 
upon  answers  by  the  same  showing  the  due  performance  of  du- 
ties, and  furnishing  the  materials  for  an  account,  if  the  property 
is  demandable  by  these  plaintiffs,  and  upon  the  plea  of  Young 
and  wife,  denying  the  validity  of  the  trust,  and  claiming  the 
property  as  heirs  of  M'Intire. 

Henry  Stanbery,  for  complainants.  C.  B.  Goddard  and  C. 
C.  Converse,  for  the  Zanesville  Canal  and  Manufacturing  Com- 
pany and  the  Executors  of  M'Intire.  Thomas  Ewing  and  E. 
Stlllwellj  for  Young  and  wife. 

By  the  Court,  LANE,  C.  J. :  The  plaintiffs'  right  to  relief  in 
the  present  case,  depends  upon  their  successfully  maintaining 
the  two  following  propositions,  to  wit :  that  the  will  of  M'Intire 
created  a  charitable  trust,  which  this  Court  can  enforce,  and  that 
they  are  the  lawful  trustees.  The  first  of  these  arises  upon  the 
plea  of  the  heirs,  the  second  is  presented  by  the  demurrers  and 
answers  of  the  other  defendants. 

We  have  entered  upon  the  examination  of  this  case  with 
much  solicitude  ;  for  the  great  value  of  the  property,  the  very 
talented  efforts  of  counsel,  and  the  consideration  that  this  is  the 
first  proper  charity  that  has  fallen  under  the  action  of  this  Court, 
all  unite  to  magnify  its  importance.  The  positions  taken  by  the 
heirs  to  show  the  bequest  void,  are,  1.  That  the  object  of  the 
testator's  bounty  are  uncertain,  and  that  the  trustees  had  no  ca- 
pacity to  take,  because  the  Zanesville  Canal  and  Manufacturing 
Company  had  no  existence  as  a  corporation  at  the  time  of  mak- 
ing and  probate  of  the  will ;  2.  That  its  corporate  powers  have 
been  so  forfeited  as  to  terminate  its  existence ;  3.  That  the  be- 
quest to  the  officers  of  the  company  vests  the  estate  in  them,  in 
that  character,  since  they  hold  by  an  annual  tenure,  and  are 
liable  to  be  changed  at  each  successive  election. 

14 


210  THE  M'INTIRE  WILL  CASE, 

It  is  admitted,  that  such  a  bequest  as  this  would  be  sustained 
in  England.  However  uncertain  the  object ;  whether  the  person 
to  take  be  in  esse  or  not ;  whether  the  bequest  can  be  carried 
into  exact  execution  or  not ;  whether  the  general  charitable  in- 
tention is  clearly  manifested, — a  court  of  equity  will  sustain  the 
legacy,  and  give  effect  to  it  in  some  form  upon  principles  of  its 
own.  But  it  is  asserted  by  the  counsel  for  the  heirs,  that  this 
lax  and  wide-reaching  jurisdiction  in  charities  is  peculiar  to 
England,  and  depends  on  the  statute  of  Elizabeth  only.  We 
would  not  unnecessarily  enter  into  the  much-disputed  and 
greatly  perplexed  inquiry  of  the  extent  of  chancery  jurisdiction 
over  charities,  independent  of  the  statute.  But  one  of  the  ear- 
liest elements  of  every  social  community  upon  its  lawgivers,  at 
the  dawn  of  its  civilization,  is  adequate  protection  to  its  prop- 
erty, and  institutions  which  subserve  public  uses,  or  are  devoted 
to  its  elevation,  or  consecrated  to  its  religious  culture,  and  its 
sepulchers ;  and  in  a  proper  case,  the  courts  of  our  State  might 
be  driven  into  the  recognition  of  some  principle  analogous  to 
that  contained  in  the  statute  of  Elizabeth,  as  a  necessary  element 
of  our  jurisprudence,  2  Story  Eq.  389;  17  Serg.  and  Raw.  88; 
9  Cowan,  437.  But  without  reference  to  these  considerations, 
where  a  trust  is  plainly  defined,  and  a  trustee  exists  capable  of 
holding  the  property  and  executing  the  trust,  it  has  never  been 
doubted  that  chancery  has  jurisdiction  over  it,  by  its  own  in- 
herent authority,  not  derived  from  the  statute,  nor  resulting  from 
its  functions  as  parens  patrice. 

The  property  devised  in  this  case,  consisted  of  land,  person- 
alty, and  stock  in  the  Zanesville  Manufacturing  Company ;  the 
legal  ownership  of  this  was  either  in  M'Intire's  executor  or  heir. 
The  condition  on  which  the  devise  ever  took  effect,  was  the  death 
of  the  daughter  without  issue.  The  objects  of  the  testator's 
bounty  were  the  poor  children  of  Zanesville,  and  the  benefit  in- 
tended was  their  education.  There  is  no  doubt  that  a  trust 
attached  to  the  property,  whoever  might  hold  it;  "for  whenever 
a  person  by  will  gives  property,  and  points  out  the  object,  the 
property,  and  the  way  it  should  go,  a  trust  is  created."  And  a 
bequest  of  land  to  A  to  construct  an  asylum  for  aged  sailors, 
although  inefficacious  to  pass  the  legal  title,  sufficiently  defines 
the  trust,  and  charges  the  heir  with  its  performance,  3  Peters, 


IN  THE  SUPREME  COURT  OF  OHIO.  211 

119,  152;  1  Story  Eq.  415;  4  Wheaton,  Appendix.  The  po- 
sition, therefore,  taken  by  the  heirs  in  the  plea,  that  the  land 
descended  to  them  on  the  death  of  the  daughter,  absolved  from 
the  trust,  is  not  supported,  but  overruled. 

The  interests  of  the  heirs  are  nevertheless  involved  in  the 
case,  for  the  next  question  arising  is,  whether  the  trusts  which 
we  have  thus  found  to  exist  shall  be  executed  by  the  plaintiffs, 
who  are  the  trustees  under  the  act  of  1836,  or  the  Zanesville 
Canal  and  Manufacturing  Company,  who  are  the  trustees  de- 
signed by  the  testator,  or  upon  the  heirs  upon  whom  the  law 
throws  the  duty,  if  there  are  no  other  trustees.  In  the  state- 
ment and  arguments  made  by  counsel,  it  seems  to  be  assumed 
that  the  Zanesville  Canal  and  Manufacturing  Company  had  no 
legal  existence  until  1816.  I  am  not  certain  this  conclusion  is 
just.  In  1812,  a  statute  enabled  M'Intire  and  his  associates  to 
build  a  dam  across  the  Muskingum,  and  cut  a  canal  around  the 
falls.  The  objects  expressed  in  the  preamble  are  the  advantages 
of  water-works,  and  the  improvement  of  the  navigation.  It 
authorizes  them  to  acquire  lands,  for  the  purpose  of  making  a 
canal,  "or  the  better  to  answer  the  objects  of  this  act,"  and  it  gives 
the  right  of  suit  to  any  person  injured  by  their  neglect.  The 
statute  therefore  imposes  a  common  liability,  and  it  implies  the 
possession  of  common  property,  and  the  duty  of  accounting  for 
profits.  The  organization  of  the  Zanesville  Canal  and  Manu- 
facturing Company  was  had  in  1814,  in  the  form  of  a  corpora- 
tion. Now,  the  bare  grant  "to  hold  Gildam  mercatoriam"  a 
mercantile  meeting,  has  been  taken  to  carry  corporate  power, 
on  account  of  common  expenditures,  10  Co.  R.  30 ;  1  Roll.  Ab. 
513 — so  a  grant  of  land,  to  a  town  on  rent,  and  other  similar 
cases,  Ang.  and  A.  on  Corp.  45.  So  the  grant  to  a  part  of  an 
ecclesiastical  society,  to  repair  their  meeting-house,  confers  cor- 
porate powers,  2  Day  Conn.  R.  259.  It  might  therefore,  per- 
haps, be  plausibly  contended  that  it  was  a  legal  existing  corpo- 
ration, before  the  date  of  the  will,  and  the  objection  of  their 
want  of  capacity  to  execute  trusts  might  receive  its  answer, 
by  the  notification  arising  from  the  subsequent  act  of  the 
Legislature. 

We  do  not,  however,  intend  to  place  our  decision  upon  this 
basis.     The  actual  situation  of  the  company,  in  1815,  was  that 


212  THE  M'INTIRE  WILL  CASE, 

of  a  corporation  de  facto,  with  officers,  and  a  capital  stock  of 
two  hundred  and  fifty  thousand  dollars,  held  in  the  form  of 
shares.  It  was  in  reference  to  this  condition,  that  M'Intire 
made  a  disposition  of  its  property.  We  have  seen  that  it  con- 
sisted of  his  mansion-house,  lands,  personalty,  and  stock.  It 
passed  to  the  company  for  the  purposes  of  this  trust,  not  by  the 
death  of  M'Intire,  but  by  a  contingency  which  happened  in  1S20, 
and  after  the  statute  of  1816,  which  imposed  upon  them  the  most 
ample  capacity  for  holding  it.  The  bequest  upon  this  trust  can 
take  effect  upon  the  very  common  ground  as  a  remainder,  con- 
tingent upon  the  death  of  M'Intire,  because  limited  to  a  person 
not  in  being,  but  becoming  vested  by  the  capacity  acquired  by 
the  corporation,  before  the  determination  of  the  particular  estate. 
And  we  should  be  justified  in  taking  still  stronger  ground  by  the 
authority  of  a  majority  of  the  judges  in  the  Sailors'  Snug  Ilar- 
bor,  3  Peters  99,  in  holding  that  a  bequest  upon  "charitable  uses 
may  take  effect,  as  an  executory  devise,  to  a  corporation  subse- 
quently acquiring  the  capacity  to  hold.  It  is,  therefore,  without 
difficulty  we  conclude  that,  on  the  decease  of  the  daughter,  the 
property  of  M'Intire  passed  to  the  Zanesville  Canal  and  Manu- 
facturing Company  upon  these  trusts. 

It  only  remains  to  inquire  if  their  right  to  it  has  been  lost, 
either  by  their  own  neglect,  or  by  subsequent  legislation.  The 
act  of  1836  was  passed  upon  the  supposed  case,  that  this  com- 
pany had  become  extinct.  It  carefully  saves  the  rights  of  all 
persons  in  the  property,  consequently  the  company  lost  none  of 
its  interests,  if  it  then  had  a  legal  existence.  If  the  corporation 
lias  been  dissolved,  it  is  not  through  judicial  action,  but  by  the 
bare  and  naked  effect  of  the  statute  limiting  the  time  for  the 
completion  of  the  dam  and  canal.  It  must  be  observed,  that  it 
is  not  the  15th  section  of  the  statute  of  1816  which  works  this 
forfeiture,  since  the  time  there  given  is  extended  in  January, 
1817,  for  one  year,  15  O.  L.  35,  and  in  December,  1817,  until 
December,  1818,  21  O.  L.  53;  and  in  1828  is  enlarged  until 
the  llth  of  February,  1835.  The  last  act,  26  O.  L.  57,  5,  26, 
27,  instead  of  declaring  all  rights,  privileges,  and  immunities 
determined,  in  case  of  failure,  like  the  statute  of  1816,  only  pro- 
vides that  the  Muskingum  Navigation  Company  may  fnish  the 
canal,  and  hold  it  until  their  expenditures  are  reimbursed. 


IN  THE  SUPREME  COURT  OF  OHIO.     2.o— 213 

There  is  no  forfeiture  attached  to  the  last  enlarging  statute  ex- 
cept what  arises  from  mere  lapse  of  time.  No  further  legislative 
act  works  a  forfeiture,  except  that  resulting  from  the  act  of 
1835,  which  recites  that  the  Zanesville  Canal  and  Manufacturing 
Company  have  lost  "its  right  to  construct  the  workf  and  author- 
ises the  canal  commissioners  to  purchase  from  them.  Now,  the 
modes  by  which  a  private  corporation  in  our  country  is  dis- 
solved are,  1.  By  the  death  of  its  members;  2.  Surrender  of  its 
franchises ;  3.  A  judgment  of  forfeiture  for  non-user  or  abuse. 
But  the  Zanesville  Canal  and  Manufacturing  Company  has  con- 
tinued an  organized  and  existing  body,  until  the  present  day ; 
there  has  been  no  judicial  act  declaring  a  forfeiture,  and  the  Leg^ 
islature,  by  the  act  of  19th  of  February,  1835,  after  the  time  of 
its  supposed  dissolution,  recognized  it  as  a  person  capable  of  con- 
tracting, by  authorizing  a  purchase  from  it,  33  0.  L.  L.  90.  It 
seems,  then,  plain  to  us,  that  at  the  time  of  the  passage  of  the 
statute  of  1836,  the  Zanesville  Canal  and  Manufacturing  Com- 
pany had  not  a  ceased  to  exist,"  and  that  their  corporate  rights 
to  execute  the  will  of  M'Intire,  through  their  officers,  according 
to  his  true  meaning,  was  not  affected  nor  impaired ;  consequently 
the  incorporation  of  the  new  Board  of  Trustees  was  void  by  the 
terms  of  the  act. 

The  suggestion  that  the  bill  may  be  sustained  at  the  suit  of 
these  plaintiffs,  as  the  representatives  of  cestuis  que  trust,  can 
not  be  supported.  This  Court  would  entertain  a  suit  for  mis- 
management brought  by  the  prosecuting  attorney,  36  0.  L.  35, 
sec.  43,  or  upon  the  relation  of  a  party  in  interest ;  but  such  a 
proceeding  would  require  a  bill  of  a  structure  altogether  different 
from  this.  BILL  DISMISSED  (a). 

(a)  In  the  subsequent  case  of  The  Zanesville  Canal  and  Manufacturing  Company 
v.  The  City  of  Zanesville.  20  Ohio,  483,  it  was  held  that  the  gift  of  John  M'Intire, 
the  subject  of  litigation  in  both  these  cases,  to  charitable  uses,  is  to  receive  the 
most  liberal  construction.  Consequently,  that  the  M'Intire  fund,  given  to  estab- 
lish "a  school  in  the  town  of  Zanesville,  for  the  poor  children  in  said  town,"  is 
not  limited  in  its  benefits  to  the  children  of  parents  residing  in  that  locality 
which  constituted  the  town  corporate  of  Zanesville  at  the  decease  of  the  testator; 
but  that  the  charity  will  be  administered  for  the  benefit  of  poor  children  in  the 
town  of  Zanesville,  according  to  the  most  general  and  popular  sense  of  the  term. 


214-3*3*7  VIDAL  v.  GIRARD, 


FRANCOIS    FENELON   VIDAL,   JOHN  F.   GIRARD,  AND   OTHERS, 

CITIZENS  AND  SUBJECTS  OF  THE  MONARCHY  OF  FRANCE,  AND 

HENRY  STUMP,  COMPLAINANTS  AND  APPELLANTS,  v.  THE 
MAYOR,  ALDERMEN,  AND  CITIZENS  OF  PHILADELPHIA,  THE 
EXECUTORS  OF  STEPHEN  GIRARD  AND  OTHERS,  DEFENDANTS. 

[THE  GIRARD  WILL  CASE.] 

[Decided  at  the  January  term,  1844,  of  the  Supreme  Court  of  the  United 
States,  Associate  Justice  JOSEPH  STORY  delivering  the  unanimous  opinion 
of  the  Court.  The  Court  -was  then  constituted  as  shown  on  page  \$>  preceding. 
Reported  in  2  Howard,  127.] 

The  corporation  of  the  city  of  Philadelphia  has  power,  under  its  charter,  to  take 
real  and  personal  estate  by  deed,  and  also  by  devise,  inasmuch  as  the  act  of 
32  and  34.  Henry  VIII,  which  excepts  corporations  from  talcing  by  devise,  is 
not  in  force  in  Pennsylvania. 

Where  a  corporation  has  this  power,  it  may  also  take  and  hold  property  in  trust 
in  the  same  manner  and  to  the  same  extent  that  a  private  person  may  do  if 
the  trust  be  repugnant  to,  or  inconsistent  with,  the  proper  purpose  for  which  the 
corporation  was  created,  it  may  not  be  compellable  to  execute  it,  but  the 
trust  (if  otherwise  unexceptionable)  will  not  be  void,  and  a  court  of  equity 
will  appoint  a  new  trustee  to  enforce  and  perfect  the  objects  of  the  trust. 

Neither  is  there  any  positive  objection,  in  point  of  law,  to  a  corporation  taking 
property  upon  a  trust  not  strictly  within  the  scope  of  the  direct  purposes  of 
its  institution,  but  collateral  to  them. 

Under  the  general  power  "for  the  suppression  of  vice  and  immorality,  the  advance- 
ment of  the  public  health  and  order,  and  the  promotion  of  trade,  industry 
and  happiness,"  the  corporation  may  execute  any  trust  germaine  to  those 
objects. 

The  charter  of  the  city  invests  the  corporation  with  power  and  rights  to  take 
property  upon  trust  for  charitable  purposes,  which  are  not  otherwise  obnox- 
ous  to  legal  animadversion. 

The  two  acts  of  March  and  April,  1832,  passed  by  the  Legislature  of  Pennsyl- 
vania are  a  legislative  interpretation  of  the  charter  of  Philadelphia,  and 
would  be  sufficient  hereafter  to  estop  the  Legislature  from  contesting  the 
competency  of  the  corporation  to  take  the  property  and  execute  the  trusts. 

If  the  trusts  were  in  themselves  valid,  but  the  corporation  incompetent  to  execute 
them,  the  heirs  of  the  deviser  could  not  take  advantage  of  such  inability ;  it 
could  only  be  done  by  the  State  in  its  sovereign  capacity,  by  a  quo  icarranto, 
or  other  proper  judicial  proceeding. 

The  trusts  mentioned  in  the  will  of  Stephen  Girard  are  of  an  eleemosynary  nature 
and  charitable  uses,  in  a  judicial  sense.  Donations  for  the  establishment  of 
colleges,  schools,  and  seminaries  of  learning,  and  especially  such  as  are  for 
the  education  of  orphans  and  poor  scholars,  are  charities  in  the  sense  of  the 
common  law. 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  215 

The  decision  of  the  Supreme  Court  of  Pennsylvania,  in  the  case  of  Zimmerman  v. 
Andres  (January  term,  1844),  recognized  and  confirmed,  viz  :  "That  the  con- 
servative provisions  of  the  statute  of  43  Elizabeth,  chap.  4,  have  been  in  force 
in  Pennsylvania,  by  common  usage  and  constitutional  recognition,  and  not 
only  these  but  the  more  extensive  range  of  charitable  uses  which  chancery 
supported  before  that  statute  and  beyond  it." 

The  present  case  distinguished  from  the  case  of  the  Trustees  of  the  Philadelphia 
Baptist  Association  v.  Hart's  Executors,  1  Wheaton  1,  upon  two  grounds,  viz: 
1.  That  the  case  in  Wheaton  arose  under  the  law  of  Virginia,  in  which  state 
the  statute  of  43  Elizabeth,  chap.  4,  had  been  expressly  and  entirely  abol- 
ished fty  the  Legislature,  so  that  no  aid  whatever  could  be-derived  from  its 
provision  to  sustain  the  bequest.  2.  That  the  donees  were  an  unincorporated 
association  which  had  no  legal  capacity  to  take  and  hold  the  donation  in 
succession  for  the  purposes  of  the  trust,  and  the  beneficiaries  were  also 
uncertain  and  indefinite. 

The  decisions  and  dicta  of  English  judges,  and  the  recent  publication  of  the 
Record  Commissioners,  in  England,  examined  as  to  the  jurisdiction  of  chan- 
cery over  charitable  devises  anterior  to  the  statute  of  43  Elizabeth.  This 
part  of  the  common  law  was  in  force  in  Pennsylvania,  although  no  court 
having  equity  powers  now  exists  or  has  existed  capable  of  enforcing  such  trusts. 

The  exclusion  of  all  ecclesiastics,  missionaries  and  ministers  of  any  sort  from 
holding  or  exercising  any  station  or  duty  in  a  college,  or  even  visiting  the 
same,  or  the  limitation  of  the  instruction  to  be  given  to  the  scholars,  to  pure 
morality,  general  benevolence,  a  love  of  truth,  sobriety,  and  industry,  are 
not  so  derogatory  and  hostile  to  the  Christian  religion  as  to  make  a  devise 
for  the  foundation  of  such  a  college  void,  according  to  the  Constitution  and 
laws  of  Pennsylvania. 

THIS  case  came  up  by  appeal  from  the  Circuit  Court  of  the 
United  States,  sitting  as  a  court  of  equity,  for  the  Eastern  Dis- 
trict of  Pennsylvania, 

The  object  of  the  bill  filed  in  the  court  below  was  to  set  aside 
a  part  of  the  will  of  the  late  Stephen  Grirard,  under  the  following 
circumstances  :  Girard,  a  native  of  France,  was  born  about  the 
middle  of  the  last  century.  Shortly  before  the  declaration  of 
independence,  he  came  to  the  United  States,  and  before  the  peace 
of  1783,  was  a  resident  of  the  city  of  Philadelphia,  where  he  died 
in  December,  1831,  a  widower  and  without  issue.  Besides  some 
real  estate  of  small  value,  near  Bordeaux,  he  was,  at  his  death, 
the  owner  of  real  estate  in  this  country  which  had  cost  him  up- 
ward of  $1,700,000,  and  of  personal  property,  worth  not  less 
than  $5, 000, 000.  His  nearest  collateral  relations  were,  a  brother, 
one  of  the  original  complainants  ;  a  niece,  the  other  complainant, 
who  was  the  only  issue  of  a  deceased  sister ;  and  three  nieces,  who 
were  defendants,  the  daughters  of  a  deceased  brother.  The  will 


216  VIDAL  v.  GIRARD, 


of  j\tr.  Girard,  with  two  codicils,  was  proved  at  Philadelphia,  on 
the  31st  of  December,  1831. 

Jones  and  Webster,  for  the  appellants,  who  were  also  the  com- 
plainants below.  Binney  and  Sargeant,  for  the  defendants. 

Mr.  Justice  STORY  delivered  the  opinion  of  the  Court :  This 
cause  has  been  argued  with  great  learning  and  ability.  Many 
topics  have  been  discussed  in  the  arguments,  as  illustrative  of  the 
principal  grounds  of  controversy,  with  elaborate  care,  upon  which 
however,  in  the  view  which  we  have  taken  of  the  merits  of  the 
cause,  it  is  not  necessary  for  us  to  express  any  opinion,  nor  even 
to  allude  to  their  bearing  or  application.  We  shall,  therefore, 
confine  ourselves  to  the  exposition  of  those  questions  and  princi- 
ples which,  in  our  judgment,  dispose  of  the  whole  matters  in  liti- 
gation ;  so  far,  at  least,  as  they  are  proper  for  the  final  adjudica- 
tion of  the  present  suit. 

The  late  Stephen  Girard,  by  his  will,  dated  the  25th  day  of 
December,  A.  D.  1830,  after  making  sundry  bequests  to  his 
relatives  and  friends,  to  the  city  of  New  Orleans,  and  to  certain 
specified  charities,  proceeded,  in  the  twentieth  clause  of  that  will, 
to  make  the  following  bequest,  on  which  the  present  controversy 
mainly  hinges : 

"  XX.  And  whereas  I  have  for  a  long  time  been  impressed  with  the  impor- 
tance of  educating  the  poor,  and  of  placing  them,  by  the  early  cultivation  of  their 
niinds  and  the  development  of  their  moral  principles,  above  the  iflu»y  temptations 
to  which,  through  poverty  and  ignorance,  they  are  exposed;  and  I  am  particu- 
larly desirous  to  provide  for  such  a  number  of  poor  male  white  orphan  children 
as  can  be  trained  in  one  institution,  a  better  education,  as  well  as  a  more  comfort- 
able maintenance,  than  they  usually  receive  from  the  application  of  the  public 
funds ;  and  whereas,  together  with  the  object  just  adverted  to,  I  have  sincerely 
at  heart  the  welfare  of  the  city  of  Philadelphia,  and  as  a  part  of  it,  am  desirous  to 
improve  the  neighborhood  of  the  river  Delaware,  so  that  the  health  of  the  citizens 
may  be  promoted  and  preserved,  and  that  the  eastern  part  of  the  city  may  be 
made  to  correspond  better  with  the  interior, — now,  I  give,  devise  and  bequeath 
all  the  residue  and  remainder  of  my  real  and  personal  estate  of  every  sort  and 
kind  wheresoever  situate  (the  real  estate  in  Pennsylvania  charged  aforesaid,) 
unto  '  the  mayor,  aldermen,  and  citizens  of  Philadelphia,'  their  successors  and 
assigns,  in  trust,  to  and  for  the  several  uses,  intents  and  purposes  hereinafter 
mentioned  and  declared  of  and  concerning  the  same,  that  is  to  say:  So  far  as 
regards  my  real  estate  in  Pennsylvania,  in  trust,  that  no  part  thereof  shall  ever  be 
sold  or  alienated  by  the  said  mayor,  aldermen,  and  citizens  of  Philadelphia,  or 
their  successors,  but  the  same  shall  forever  thereafter  be  let  from  time  to  time,  to 
good  tenants,  at  yearly  or  other  rents,  and  upon  leases  in  possession  not  exceeding 


IN  THE   SUPREME  COURT  OF  THE  U.  STATES.  217 

five  years  from  the  commencement  thereof,  and  that  the  rents,  issues,  and  profits 
arising  therefrom  shall  be  applied  toward  keeping  that  part  of  said  real  estate 
situate  in  the  city  and  liberties  of  Philadelphia  constantly  in  good  repair  (parts 
elsewhere  situate  to  be  kept  in  repair  by  the  tenants  thereof  respectively),  and 
toward  improving  the  same,  whenever  necessary,  by  erecting  new  buildings  and 
that  the  net  residue  (after  paying  the  several  annuities  herein  before  provided 
for)  be  applied  to  the  same  uses  and  purposes  as  are  herein  declared  of  and  con- 
cerning the  residue  of  my  personal  estate ;  and  so  far  as  regards  my  real  estate 
in  Kentucky,  now  under  the  care  of  Messrs.  Triplett  and  Brumley,  in  trust,  to 
sell  and  dispose  of  the  same,  whenever  it  may  be  expedient  to  do  so,  and  to  apply 
the  proceeds  of  such  sale  to  the  same  uses  and  purposes  as  are  herein  declared  of 
and  concerning  the  residue  of  my  personal  estate. 

"  XXI.  And  as  far  as  regards  the  residue  of  my  personal  estate,  in  trust,  as 
to  two  millions  of  dollars,  part  thereof,  to  apply  and  expend  so  much  of  that 
sum  as  may  be  necessary,  in  erecting,  as  soon  as  practically  may  be,  in  the  center 
of  my  square  of  ground  between  High  and  Chestnut  Streets,  and  Eleventh  and 
Twelfth  Streets,  in  the  city  of  Philadelphia  (a),  (which  square  of  ground  I  hereby 
devote  for  the  purposes  hereinafter  stated,  and  for  no  other,  forever,)  a  permanent 
college,  with  suitable  out-buildings,  sufficiently  spacious  for  the  residence  and 
accommodation  of  at  least  three  hundred  scholars,  and  the  requisite  teachers  and 
other  persons  necessary  in  such  an  institution  as  I  direct  to  be  established,  and 
in  supplying  the  said  college  and  out-buildings  with  decent  and  suitable  furni- 
ture, as  well  as  books  and  all  things  needful  to  carry  into  effect  my  general 
design." 

The  testator  then  proceeded  to  give  a  minute  detail  of  the 
plan  and  structure  of  the  college,  and  certain  rules  and  regula- 
tions for  the  due  management  and  government  thereof,  and  the 
studies  to  be  pursued  therein,  comprehending  reading,  writing, 
grammar,  arithmetic,  geography,  navigation,  surveying,  prac- 
tical mathematics,  astronomy,  natural,  chemical,  and  experi- 
mental philosophy,  the  French  and  Spanish  languages  (not  for- 
bidding, but  not  recommending  the  Greek  and  Latin  languages), 
"and  such  other  learning  and  science  as  the  capacities  of  the 
several  scholars  may  merit  or  warrant."  He  then  added,  "I 
would  have  them  taught  facts  and  things,  rather  than  words  or 
signs ;  and  especially  I  desire  that  by  every  proper  means  a 
pure  attachment  to  our  republican  institutions,  and  to  the  sacred 
rights  of  conscience,  as  guaranteed  by  our  happy  constitutions, 
shall  be  formed  and  fostered  in  the  minds  of  the  scholars." 

The  persons  who  are  to  receive  the  benefits  of  the  institu- 
tion, he  declared  to  be  "poor  white  male  orphans,  between  the 
ages  of  six  and  ten  years ;  and  no  orphan  should  be  admitted 

(a)  It  will  be  seen  hereinafter,  that  by  a  codicil  he  selected  another  site  for 
"Girard  College,"  upon  which  latter  location  it  was  finally  constructed. 


218  VIDAL  v.  GIRARD, 


until  the  guardians  or  directors  of  the  poor,  or  other  proper 
guardian,  or  other  competent  authority,  have  given,  by  inden- 
ture, relinquishraent,  or  otherwise,  adequate  power  to  the  mayor, 
aldermen,  and  citizens  of  Philadelphia,  or  to  directors  or  others 
by  them  appointed,  to  enforce  in  relation  to  each  orphan  every 
proper  restraint,  and  to  prevent  relatives  or  others  from  inter- 
fering with,  or  withdrawing  such  orphan  from  the  institution." 
The  testator  then  provided  for  a  preference,  "  first,  to  orphans 
born  in  the  city  of  Philadelphia ;  secondly,  to  those  born  in  any 
other  part  of  Pennsylvania ;  thirdly,  to  those  born  in  the  city 
of  New  York ;  and  lastly,  to  those  born  in  the  city  of  New  Or- 
leans." The  testator  further  provided  that  the  orphan  "  schol- 
ars who  shall  merit  it,  shall  remain  in  the  college  until  they 
shall  respectively  arrive  at  between  fourteen  and  eighteen  years 
of  age." 

The  testator  then,  after  suggesting  that,  in  relation  to  the 
organization  of  the  college  and  its  appendages,  he  leaves  neces- 
sarily many  details  to  the  mayor,  aldermen,  and  citizens  of 
Philadelphia,  and  their  successors,  proceeded  to  say : 

"There  are,  however,  some  restrictions  which  I  consider  it  my  duty  to  pre- 
scribe, and  to  be,  amongst  others,  conditions  on  which  my  bequest  for  said  college 
is  made  and  to  be  enjoyed,  namely :  First,  I  enjoin  and  require,  that  if,  at  the 
close  of  any  year,  the  income  of  the  fund  devoted  to  the  purposes  of  the  said 
college  shall  be  more  than  sufficient  for  the  maintenance  of  the  institution  dur- 
ing that  year,  then  the  balance  of  the  said  income,  after  defraying  such  main- 
tenance, shall  be  forthwith  invested  in  good  securities,  thereafter  to  be  and 
remain  a  part  of  the  capital;  but,  in  no  event,  shall  any  part  of  the  said  capital 
be  sold,  disposed  of,  or  pledged,  to  meet  the  current  expenses  of  the  said  institu- 
tion, to  which  I  devote  the  interest,  income,  and  dividends  thereof,  exclusively. 
Secondly,  I  enjoin  and  require,  that  no  ecclesiastic,  missionary,  or  minister,  of 
any  sect  whatsoever,  shall  ever  hold  or  exercise  any  station  or  duty  whatever  in 
the  said  college;  nor  shall  any  such  person  ever  be  admitted  for  any  purpose, 
or  as  a  visitor,  within  the  premises  appropriated  to  the  purposes  of  the  said 
college." 

This  second  injunction  and  requirement  is  that  which  has 
been  so  elaborately  commented  on  at  the  bar,  as  derogatory  to 
the  Christian  religion,  and  upon  which  something  will  be  here- 
after suggested  in  the  course  of  this  opinion. 

The  testator  then  bequeathed  the  sum  of  $500,000.  to  be 
invested,  and  the  income  thereof  applied  to  lay  out,  regulate, 
and  light  and  pave  a  passage  or  street  in  the  east  part  of  the 
city  of  Philadelphia,  fronting  the  river  Delaware,  not  less  than 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  219 

twenty-one  feet  wide,  and  to  be  called  Delaware  Avenue,  etc.  • 
and  to  this  intent  to  obtain  such  acts  of  Assembly,  and  to  make 
such  purchases  or  agreements,  as  will  enable  the  mayor,  alder- 
men, and  citizens  of  Philadelphia  to  remove  or  pull  down  all  the 
buildings,  fences,  and  obstructions  which  may  be  in  the  way,  and 
to  prohibit  all  buildings,  fences,  or  erections  of  any  kind  to  the 
eastward  of  said  avenue,  etc. ;  and  he  proceeded  to  give  other 
minute  directions  touching  the  same. 

The  testator  then  bequeathed  to  the  Commonwealth  of  Penn- 
sylvania the  sum  of  $300,000,  for  the  purpose  of  internal  im- 
provement by  canal  navigation,  to  be  paid  into  the  State  treasury 
as  soon  as  such  laws  shall  be  enacted  by  the  Legislature  to 
carry  into  effect  the  several  improvements  before  specified,  and 
certain  other  improvements. 

The  testator  then  bequeathed  the  remainder  of  the  residue 
of  his  personal  estate  in  trust  to  invest  the  same  in  good  secu- 
rities, etc.,  so  that  the  whole  shall  form  a  permanent  fund,  and 
to  apply  the  income  thereof  to  certain  specified  purposes,  which 
he  proceeds  to  name;  and  then  said: 

"  To  all  which  objects,  the  prosperity  of  the  city,  and  the  health  and  comfort 
of  its  inhabitants,  I  devote  the  said  fund  as  aforesaid,  and  direct  the  income 
thereof  to  be  applied  yearly  and  every  year  forever,  after  providing  for  the  col- 
lege as  hereinbefore  directed,  as  my  primary  object.  But,  if  the  said  city  shall 
knowingly  and  willfully  violate  any  of  the  conditions  hereinbefore  and  here- 
inafter mentioned,  then  I  give  and  bequeath  the  said  remainder  and  accumula- 
tions to  the  Commonwealth  of  Pennsylvania,  for  the  purposes  of  internal  navi- 
gation; excepting,  however,  the  rents,  issues  and  profits  of  my  real  estate  in  the 
city  and  county  of  Philadelphia,  which  shall  forever  be  reserved  and  applied  to 
maintain  the  aforesaid  college,  in  the  manner  specified  in  the  last  paragraph  of 
the  XXIst  clause  of  this  will.  And  if  the  Commonwealth  of  Pennsylvania  shall 
fail  to  apply  this  or  the  preceding  bequest  to  the  purposes  before  mentioned,  or 
shall  apply  any  part  thereof  to  any  other  use,  or  shall,  for  the  term  of  one  year 
from  the  time  of  my  decease,  fail  or  omit  to  pass  the  laws  hereinbefore  specified 
for  promoting  the  improvement  of  the  city  of  Philadelphia,  then  I  give,  devise, 
and  bequeath  the  said  remainder  and  accumulations  (the  rents  aforesaid  always 
excepted  and  reserved  for  the  college  as  aforesaid)  to  the  United  States  of  Amer- 
ica, for  the  purposes  of  internal  navigation,  and  no  other." 

These  are  the  material  clauses  of  the  will  which  seem  neces- 
sary to  be  brought  under  our  review  in  the  present  controversy. 
By  a  codicil  dated  the  20th  of  June,  A.  D.  1831,  the  testator 
made  the1  following  provision : 

"Whereas  I,  Stephen  Girard,  the  testator  named  in  the  foregoing  will  and 
testament,  dated  February  16,  1830,  have,  since  the  execution  thereof,  purchased 


220  VIDAL  v.  GIRARD, 


several  parcels  and  pieces  of  land  and  real  estate,  and  have  built  sundry  mes- 
suages, all  of  which,  as  well  as  any  real  estate  that  I  may  hereafter  purchase,  it 
is  my  intention  to  pass  by  said  will ;  and  whereas,  in  particular,  I  have  recently 
purchased  from  Mr.  William  Parker  the  mansion-house,  out-buildings,  and  forty- 
live  acres  and  some  perches  of  land,  called  Peel  Hall,  on  the  Ridge  Road,  in  Penn 
Township:  now,  I  declare  it  to  be  my  intention,  and  I  direct,  that  the  orphan 
establishment,  provided  for  in  my  said  will,  instead  of  being  built  as  therein  di- 
rected upon  my  square  of  ground  between  High  and  Chestnut  and  Eleventh  and 
Twelfth  Streets,  in  the  city  of  Philadelphia,  shall  be  built  upon  the  estate  so  pur- 
chased from  Mr.  W.  Parker,  and  I  hereby  devote  the  said  estate  to  that  purpose, 
exclusively,  in  the  same  manner  as  I  had  devoted  the  said  square,  hereby  direct- 
ing that  all  the  improvements  and  arrangements  for  the  said  orphan  establish- 
ment, prescribed  by  my  said  will,  as  to  said  square,  shall  be  made  and  executed 
upon  the  said  estate,  just  as  if  I  had  in  my  will  devoted  the  said  estate  to  said 
purpose — consequently,  the  said  square  of  ground  is  to  constitute,  and  I  declare 
it  to  be,  a  part  of  the  residue  and  remainder  of  my  real  and  personal  estate,  and 
given  and  devised  for  the  same  uses  and  purposes  as  are  declared  in  section  XX 
of  my  will,  it  being  my  intention,  that  the  said  square  of  ground  shall  be  built 
upon,  and  improved  in  such  a  manner  as  to  secure  a  safe  and  permanent  income 
for  the  purposes  stated  in  the  XXth  section." 

The  testator  died  in  the  same  year;  and  his  will  and  codicil 
were  duly  admitted  to  probate  on  the  31st  of  December  of  the 
same  year. 

The  Legislature  of  Pennsylvania  passed  the  requisite  laws  to 
carry  into  effect  the  will,  so  far  as  respected  the  bequests  of  the 
$500,000  for  the  Delaware  Avenue  and  the  $300,000  for  inter- 
nal improvement  by  canal  navigation,  according  to  the  bequest 
of  the, testator. 

The  present  bill  is  brought  by  the  heirs  at  law  of  the  testator, 
to  have  the  devise  of  the  residue  and  remainder  of  the  real  es- 
tate to  the  mayor,  aldermen,  and  citizens  of  Philadelphia,  in 
trust  as  aforesaid,  to  be  declared  void,  for  the  want  of  capacity 
of  the  supposed  devisees  to  take  lands  by  devise,  or  if  capable 
of  taking  by  devise  generally  for  their  own  use  and  benefit,  for 
want  of  capacity  to  take  such  lands  as  devisees  in  trust ;  and 
because  the  objects  of  the  charity  for  which  the  lands  are  so 
devised  in  trust  are  altogether  vague,  indefinite,  and  uncertain, 
and  so  no  trust  is  created  by  the  said  will  which  is  capable  of  being 
executed  or  of  being  cognizable  at  law  or  in  equity,  nor  any  trust 
estate  devised  that  can  vest  at  law  or  in  equity  in  any  existing 
or  possible  ccstui  que  trust)  and  therefore  the  bill  insists  that, 
as  the  trust  is  void,  there  is  a  resulting  trust  thereof  for  the 
heirs  at  law  of  the  testator ;  and  the  bill  accordingly  seeks  a 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  221 

declaration  to  that  effect  and  the  relief  consequent  thereon,  and 
for  a  discovery  and  account,  and  for  other  relief. 

The  principal  questions,  to  which  the  arguments  at  the  bar 
have  been  mainly  addressed,  are,  first,  whether  the  corporation 
of  the  'city  of  Philadelphia  is  capable  of  taking  the  bequest  of 
the  real  and  personal  estate  for  the  erection  and  support  of  a 
college  upon  the  trusts  and  for  the  uses  designated  in  the  will ; 
secondly,  whether  these  uses  are  charitable  uses,  valid  in  their 
nature  and  capable  of  being  carried  into  effect  consistently  with 
the  laws  of  Pennsylvania ;  thirdly,  if  not,  whether,  being  void, 
the  fund  falls  into  the  residue  of  the  testator's  estate,  and  be- 
longs to  the  corporation  of  the  city,  in  virtue  of  the  residuary 
clause  in  the  will ;  or  it  belongs,  as  a  resulting  or  implied  trust, 
to  the  heirs  and  next  of  kin  of  the  testator. 

As  to  the  first  question,  so  far  as  it  respects  the  capacity  of 
the  corporation  to  take  the  real  and  personal  estate,  indepen- 
dently of  the  trusts  and  uses  connected  therewith,  there  would 
not  seem  to  be  any  reasonable  ground  for  doubt.  The  act  of  32 
and  34  Henry  VIII,  respecting  wills,  excepts  corporations  from 
taking  by  devise ;  but  this  provision  has  never  been  adopted 
into  the  laws  of  Pennsylvania  or  in  force  there.  The  act  of 
llth  of  March,  1789,  incorporating  the  city  of  Philadelphia, 
provides  that  the  corporators  shall  have  perpetual  succession, 
"  and  they  and  their  successors  shall  at  all  times  forever  be  ca- 
pable in  law  to  have,  purchase,  take,  receive,  possess,  and  enjoy 
lands,  tenements,  and  hereditaments,  liberties,  franchises,  and 
jurisdictions,  goods,  chattels,  and  effects,  to  them  and  their  suc- 
cessors forever,  or  for  any  other  or  less  estate,"  etc.,  without  any 
limitation  whatsoever  as  to  the  value  or  amount  thereof,  or  as  to 
the  purposes  to  which  the  same  were  to  be  applied,  except  so 
far  as  may  be  gathered  from  the  preamble  of  the  act,  which  re- 
cites that  the  then  administration  of  government  within  the  city 
of  Philadelphia  was  in  its  form  "  inadequate  to  the  suppression 
of  vice  and  immorality,  to  the  advancement  of  the  public  health 
and  order,  and  to  the  promotion  of  trade,  industry,  and  happi- 
ness, and  in  order  to  provide  against  the  evils  occasioned 
thereby,  it  is  necessary  to  invest  the  inhabitants  thereof  with 
more  speedy,  vigorous,  and  effective  powers  of  government  than 
at  present  established."  Some,  at  least,  of  these  objects  might 


222  VIDAL  v.  GIRARD, 


certainly  be  promoted  by  the  application  of  the  city  property  or 
its  income  to  them — and  especially  the  suppression  of  vice  and 
immorality,  and  the  promotion  of  trade,  industry,  and  happiness. 
And  if  a  devise  of  real  estate  had  been  made  to  the  city  directly 
for  such  objects,  it  would  be  difficult  to  perceive  why  such  trusts 
should  not  be  deemed  within  the  scope  of  the  city  charter  and 
protected  thereby. 

But  without  doing  more  at  present  than  merely  to  glance  at 
this  consideration,  let  us  proceed  to  the  inquiry  whether  the  cor- 
poration of  the  city  can  take  real  and  personal  property  in  trust. 
Now,  although  it  was  in  very  early  times  held  that  a  corporation 
could  not  take  and  hold  real  or  personal  estate  in  trust,  upon 
the  ground  that  there  was  a  defect  of  one  of  the  requisites  to 
create  a  good  trustee,  viz,  the  want  of  confidence  in  the  person ; 
yet  that  doctrine  has  been  long  since  exploded  as  unsound,  and 
too  artificial  ;  and  it  is  now  held,  that  where  the  corporation  has 
a  legal  capacity  to  take  real  or  personal  estate,  there  it  may 
take  and  hold  it  upon  trust,  in  the  same  manner  and  to  the  same 
extent  as  a  private  person  may  do.  It  is  true  that,  if  the  trust 
be  repugnant  to,  or  inconsistent  with,  the  proper  purposes  for 
which  the  corporation  was  created,  that  may  furnish  a  ground 
why  it  may  not  be  compellable  to  execute  it.  JBut  that  will  fur- 
nish no  ground  to  declare  the  trust  itself  void,  if  otherwise  un- 
exceptionable ;  but  it  will  simply  require  a  new  trustee  to  be 
substituted  by  the  proper  court,  possessing  equity  jurisdiction, 
to  enforce  and  perfect  the  objects  of  the  trust.  This  will  be 
sufficiently  obvious  upon  an  examination  of  the  authorities ;  but 
a  single  case  may  suffice.  In  Sonley  v.  The  Clock-makers1  Com- 
pany, 1  Bro.  Ch.  81,  there  was  a  devise  of  freehold  estate  to  the 
testator's  wife  for  life,  with  remainder  to  his  brother  C.  in  tail, 
with  remainder  to  the  Clock-makers'  Company,  in  trust  to  sell 
for  the  benefit  of  the  testator's  nephews  and  nieces.  The  devise 
being  to  a  corporation  was,  by  the  English  statute  of  wills,  void, 
that  statute  prohibiting  devises  to  corporations,  and  the  question 
was  whether,  the  devise  being  so  void,  the  heir  at  law  took  ben- 
eficially or  subject  to  the  trust.  Mr.  Baron  EYRE,  in  his  judg- 
ment, said,  that  although  the  devise  to  the  corporation  be  void 
at  law,  yet  the  trust  is  sufficiently  created  to  fasten  itself  upon 
any  estate  the  law  may  raise.  This  is  the  ground  upon  which 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  223 

courts  of  equity  have  decreed,  in  cases  where  no  trustee  is 
named.  Now,  this  was  a  case  not  of  a  charitable  devise,  but  a 
trust  created  for  nephews  and  nieces)  so  that  it  steers  wide 
from  the  doctrines  which  have  been  established  as  to  devises  to 
corporations  for  charities  as  appointments  under  the  statute  of 
43  Elizabeth :  a  fortiori,  the  doctrine  of  this  case  must  apply 
with  increased  stringency  to  a  case  where  the  corporation  is  ca- 
pable at  law  to  take  the  estate  devised,  but  the  trusts  are  utterly 
deliors  the  purposes  of  the  incorporation.  In  such  a  case,  the  trust 
itself  being  good,  will  be  executed  by  and  under  the  authority 
of  a  court  of  equity.  Neither  is  there  any  positive  objection  in 
point  of  law  to  a  corporation  taking  property  upon  a  trust  not 
strictly  within  the  scope  of  the  direct  purposes  of  its  institution, 
but  collateral  to  them ;  nay,  for  the  benefit  of  a  stranger  or  of 
another  corporation.  In  the  case  of  Green  v.  Rutherforth,  1 
Vesey,  462,  a  devise  was  made  to  St.  John's  College,  in  Cam- 
bridge, of  the  perpetual  advowson  of  a  rectory  in  trust,  that 
whenever  the  church  should  be  void  and  his  nephew  be  capable 
of  being  presented  thereto,  they  should  present  him  j  and  on  the 
next  avoidance  should  present  one  of  his  name  and  kindred,  if 
there  should  be  any  one  capable  thereof  in  the  college ;  if  none 
such,  they  should  present  the  senior  divine  then  fellow  of  the 
college ;  and  on  his  refusal,  the  next  senior  divine,  and  so  down- 
ward ;  and,  if  all  refused,  they  should  present  any  other  person 
they  should  think  fit.  Upon  the  argument  of  the  cause,  an  ob- 
jection was  taken  that  the  case  was  not  cognizable  in  a  court 
of  equity,  but  fell  within  the  jurisdiction  of  the  visitor.  Sir 
JOHN  STRANGE  (the  Master  of  the  Rolls),  who  assisted  Lord 
HARDWICKE  at  the  hearing  of  the  cause,  on  that  occasion  said : 
"  A  private  person  would,  undoubtedly,  be  compellable  to  execute 
it  [the  trust]  j  and,  considered  as  a  trust,  it  makes  no  difference 
who  are  the  trustees,  the  power  of  this  Court  operating  on  them 
in  the  capacity  of  trustees.  And  though  they  are  a  collegiate 
body,  whose  founder  has  given  a  visitor  to  superintend  his  own 
foundation  and  bounty ;  yet  as  between  one  claiming  under  a 
separate  benefactor  and  these  trustees  for  special  purposes,  the 
Court  will  look  on  them  as  trustees  only,  and  oblige  them  to 
execute  it  under  direction  of  the  Court."  Lord  HARDWICKE, 
after  expressing  his  concurrence  in  the  judgments  of  the  Master 


224  VIDAL  v.  GIRARD, 


of  the  Rolls,  put  the  case  of  the  like  trust  being  to  present  no 
member  of  another  college,  and  held  that  the  court  would  have 
jurisdiction  to  enforce  it. 

But  if  the  purposes  of  the  trust  be  germane  to  the  objects  of 
the  incorporation ;  if  they  relate  to  matters  which  Avill  promote 
and  aid  and  perfect  these  objects ;  if  they  tend  (as  the  charter 
of  the  city  of  Philadelphia  expresses  it)  u  to  the  suppression  of 
vice  and  immorality,  to  the  advancement  of  the  public  health  and 
order,  and  to  the  promotion  of  trade,  industry,  and  happiness," 
where  is  the  law  to  be  found  which  prohibits  the  corporation  from 
taking  the  devise  upon  such  trusts,  in  a  state  where  the  statutes 
of  mortmain  do  not  exist  (as  they  do  not  in  Pennsylvania),  the 
corporation  itself  having  a  legal  capacity  to  take  the  estate  as 
well  by  devise  as  otherwise  ?  We  know  of  no  authorities  which 
inculcate  such  a  doctrine  or  prohibit  the  execution  of  such  trusts, 
even  though  the  act  of  incorporation  may  have  for  its  main  objects 
mere  civil  and  municipal  government  and  regulations  and  powers. 
If,  for  example,  the  testator  by  his  present  will  had  devised  cer- 
tain estate  of  the  value  of  $1,000,000  for  the  purpose  of  applying 
the  income  thereof  to  supplying  the  city  of  Philadelphia  with 
good  and  wholesome  water  for  the  use  of  the  citizens,  from  the 
river  Schuylkill  (an  object  which  some  thirty  or  forty  years  ago 
would  have  been  thought  of  transcendant  benefit),  why,  although 
not  specifically  enumerated  among  the  objects  of  the  charter, 
would  not  such  a  devise  upon  such  a  trust  have  been  valid,  and 
within  the  scope  of  the  legitimate  purposes  of  the  corporation, 
and  the  corporation  capable  of  executing  it  as  trustees  ?  We 
profess  ourselves  unable  to  perceive  any  sound  objection  to  the 
validity  of  such  a  trust ;  and  we  know  of  no  authority  to  sustain 
any  objection  to  it.  Yet,  in  substance,  the  trust  would  be  as 
remote  from  the  express  provisions  of  the  charter  as  are  the 
objects  (supposing  them  otherwise  maintainable)  now  under  our 
consideration.  In  short,  it  appears  to  us  that  any  attempt  to 
narrow  down  the  powers  given  to  the  corporation  so  as  to  exclude 
it  from  taking  property  upon  trusts  for  purposes  confessedly 
charitable  and  beneficial  to  the  city  or  the  public,  would  be  to 
introduce  a  doctrine  inconsistent  with  sound  principles,  and  defeat 
instead  of  promoting  the  true  policy  of  the  State.  We  think, 
then,  that  the  charter  of  the  city  does  invest  the  corporation  with 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  225 

powecs  and  rights  to  take  property  upon  trust  for  charitable  pur- 
poses, which  are  not  otherwise  obnoxious  to  legal  animadversion ; 
and  therefore,  the  objection  that  it  is  incompetent  to  take  or 
administer  a  trust,  is  unfounded  in  principle  or  authority,  under 
the  law  of  Pennsylvania. 

It  is  manifest  that  the  Legislature  of  Pennsylvania  acted  upon 
this  interpretation  of  the  charter  of  the  city,  in  passing  the  acts 
of  the  24th  of  March,  and  the  4th  of  April,  1832,  to  carry  into 
effect  certain  improvements  and  execute  certain  trusts,  under  the 
will  of  Mr.  Girard.  The  preamble  to  the  trust  act,  expressly 
states  that  it  is  passed  "  to  effect  the  improvements  contemplated 
by  the  said  testator,  and  to  execute,  in  all  other  respects,  the 
trusts  created  by  his  will,"  as  to  which  the  testator  had  desired 
the  Legislature  to  pass  the  necessary  laws.  The  tenth  section  of 
the  same  act  provides,  "  That  it  shall  be  lawful  for  the  mayor, 
aldermen,  and  citizens  of  Philadelphia,  to  exercise  all  such  juris- 
diction, enact  all  such  ordinances,  and  to  do  and  execute  all  such 
things  and  acts  whatsoever,  as  may  be  necessary  and  convenient 
for  the  full  and  entire  acceptance,  execution,  and  prosecution  of 
any  and  all  the  devises,  bequests,  trusts,  and  provisions  contained 
in  the  said  will,  etc.,  etc.,  to  carry  which  into  effect,"  the  testa- 
tor had  desired  the  Legislature  to  enact  the  necessary  laws.  But 
what  is  more  direct  to  the  present  purpose,  because  it  imports  a 
full  recognition  of  the  validity  of  the  devise  for  the  erection  of  the 
college,  is  the  provision  of  the  llth  section  of  the  same  act,  which 
declares,  "That  no  road  or  street  shall  be  laid  out,  or  passed 
through  the  land  in  the  county  of  Philadelphia,  bequeathed  by 
the  late  Stephen  Girard,  for  the  erection  of  a  college,  unless  the 
same  shall  be  recommended  by  the  trustees  or  directors  of  the 
said  college,  and  approved  by  a  majority  of  the  select  and  com- 
mon councils  of  the  city  of  Philadelphia."  The  other  act  is  also 
full  and  direct  to  the  same  purpose,  and  provides,  "  That  the 
select  and  common  councils  of  the  city  of  Philadelphia  shall  be 
and  they  are  hereby  authorized  to  provide,  by  ordinance  or  other- 
wise, for  the  election  or  appointment  of  such  officers  and  agents 
as -they  may  deem  essential  to  the  due  execution  of  the  duties  and 
trusts  enjoined  and  created  by  the  will  of  the  late  Stephen  Girard." 
Here,  then,  there  is  a  positive  authority  conferred  upon  the  city 
authorities  to  act  upon  the  trusts  under  the  will,  and  to  administer 

15 


226  VIDAL  v.  GIRARD, 


the  same  through  the  instrumentality  of  agents  appointed  by 
them.  No  doubt,  can  then  be  entertained,  that  the  legislature 
meant  to  affirm  the  entire  validity  of  those  trusts,  and  the  entire 
competency  of  the  corporation  to  take  and  hold  the  property 
devised  upon  the  trusts  named  in  the  will. 

It  is  true  that  this  is  not  a  judicial  decision,  and  entitled  to 
full  weight  and  confidence  as  such.  But  it  is  a  legislative  expo- 
sition and  confirmation  of  the  competency  of  the  corporation  to 
take  the  property  and  execute  the  trusts  ;  and  if  those  trusts  were 
valid  in  point  of  law,  the  Legislature  would  be  estopped  thereafter 
to  contest  the  competency  of  the  corporation  to  take  the  property 
and  execute  the  trusts,  either  upon  a  quo  ivarranto  or  any  other 
proceeding,  by  which  it  should  seek  to  divest  the  property,  and 
invest  other  trustees  with  the  execution  of  the  trusts,  upon  the 
ground  of  any  supposed  incompetency  of  the  corporation.  And 
if  the  trusts  were  in  themselves  valid  in  point  of  law,  it  is  plain 
that  neither  the  heirs  of  the  testator,  nor  any  other  private  per- 
sons, could  have  any  right  to  inquire  into,  or  contest  the  right  of 
the  corporation  to  take  the  property,  or  to  execute  the  trusts ; 
but  this  right  would  belong  exclusively  to  the  State  in  its  sover- 
eign capacity,  and  in  its  sole  discretion,  to  inquire  into  and  con- 
test the  same  by  a  quo  warranto,  or  other  proper  judicial  proceed- 
ing. In  this  view  of  the  matter,  the  recognition  and  confirmation 
of  the  devises  and  trusts  of  the  will  by  the  Legislature  are  of  the 
highest  importance  and  potency. 

We  are,  then,  led  directly  to  the  consideration  of  the  question 
which  has  been  so  elaborately  argued  at  the  bar,  as  to  the  validity 
of  the  trusts  for  the  erection  of  the  college,  according  to  the 
requirements  and  regulations  of  the  will  of  the  testator.  That 
the  trusts  are  of  an  eleemosynary  nature,  and  charitable  uses  in 
a  judicial  sense,  we  entertain  no  doubt.  Not  only  are  charities 
for  the  maintenance  and  relief  of  the  poor,  sick,  and  impotent, 
charities  in  the  sense  of  the  common  law,  but  also  donations  given 
for  the  establishment  of  colleges,  schools,  and  seminaries  of  learn- 
ing, and  especially  such  as  are  for  the  education  of  orphans  and 
poor  scholars. 

The  statute  of  the  43  of  Elizabeth,  ch.  4,  has  been  adjudged 
by  the  Supreme  Court  of  Pennsylvania  not  to  be  in  force  in  that 
state.  But  then  it  has  been  solemnly  and  recently  adjudged  by 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  227 

the  same  court,  in  the  case  of  Zimmerman  v.  Andres  (January 
term,  1844),  that  "it  is  so  considered  rather  on  account  of  the 
inapplicability  of  its  regulations  as  to  the  modes  of  proceeding, 
than  in  reference  to  its  conservative  provisions."  "  These  have 
been  in  force  here  by  common  usage  and  constitutional  recogni- 
tion ;  and  not  only  these,  but  the  more  extensive  range  of  chari- 
table uses  which  chancery  supported  before  that  statute  and 
beyond  it."  Nor  is  this  any  new  doctrine  in  that  court ;  for  it 
was  formally  promulgated  in  the  case  of  Witman  v.  Lex,  1 7  Serg. 
and  Rawle,  88,  at  a  much  earlier  period  (1827). 

Several  objections  have  been  taken  to  the  present  bequest,  to 
extract  it  from  the  reach  of  these  decisions.  In  the  first  place, 
that  the  corporation  of  the  city  is  incapable  by  law  of  taking  the 
donation  for  such  trusts.  This  objection  has  been  already  suffi- 
ciently considered.  In  the  next  place,  it  is  said  that  the  benefi- 
ciaries who  are  to  receive  the  benefit  of  the  charity  are  too  uncer- 
tain and  indefinite  to  allow  the  bequest  to  have  any  legal  affect, 
and  hence  the  donation  is  void,  and  the  property  results  to  the 
heirs.  And  in  support  of  this  argument,  we  are  pressed  by  the 
argument  that  charities  of  such  an  indefinite  nature  are  not  good 
at  the  common  law  (which  is  admitted  on  all  sides  to  be  the  law 
of  Pennsylvania,  so  far  as  it  is  applicable  to  its  institutions  and 
constitutional  organization  and  civil  rights  and  privileges),  and 
hence  the  charity  fails  ;  and  the  decision  of  this  Court  in  the  case 
of  the  trustees  of  the  Philadelphia  Baptist  Association  v.  Hart's 
Executors,  4  "Wheat.  1,  is  strongly  relied  on  as  fully  in  point. 
There-  are  two  circumstances  which  materially  distinguish  that 
case  from  the  one  now  before  the  Court.  The  first/  is,  that  that 
case  arose  under  the  law  of  Virginia,  in  which  state  the  statute 
of  43  Elizabeth,  ch.  4,  had  been  expressly  and  entirely  abolished 
by  the  Legislature,  so  that  no  aid  whatsoever  vcould  be  derived 
from  its  provisions  to  sustain  the.  bequest.  The  second  is,  that 
the  donees  (the  trustees)  were  an  unincorporated  association, 
which  had  no  legal  capacity  to  take  and  hold  the  donation  in 
succession  for  the  purposes  of  the  trust,  and  the  beneficiaries  also 
were  uncertain  and  indefinite.  Both  circumstances,  therefore, 
concurred ;  a  donation  to  trustees  incapable  of  taking,  and  bene- 
ficiaries uncertain  and  indefinite.  The  Court,  upon  that  occasion, 
went  into  an  elaborate  examination  of  the  doctrine  of  the  com- 


228  VIDAL  v.  GIRARD, 


mon  law  on  the  subject  of  charities,  antecedent  to  and  independ- 
ent of  the  statute  of  43  Elizabeth,  ch.  4,  for  that  was  still  the 
common  law  of  Virginia.  Upon  a  thorough  examination  of  all 
the  authorities  and  all  the  lights  (certainly  in  no  small  degree 
shadowy,  obscure,  and  flickering),  the  Court  came  to  the  conclu- 
sion that,  at  the  common  law,  no  donation  to  charity  could  be 
enforced  in  chancery,  where  both  of  these  circumstances,  or  rather 
where  both  of  these  defects,  occurred.  The  Court  said :  "  We 
find  no  dictum  that  charities  could  Be  established  on  such  an 
information  (by.  the  attorney-general)  where  the  conveyance  was 
defective  or  the  donation  was  so  vaguely  expressed  that  the  donee, 
if  not  a  charity,  would  be  incapable  of  taking."  In  reviewing 
the  authorities  upon  that  occasion,  much  reliance  was  placed 
upon  Collison's  case,  Hobart's  Rep.  136  (S.  C.  cited  Duke  on 
Charities,  by  Bridgman,  368,  Moore,  R.,  888) ;  and  Plait  v.  St. 
John's  College,  Cambridge,  Finch.  Rep.  221  (S^  C.  1  Cas.  in 
Chan.  R.  267,  Duke  on  Charities,  by  Bridgman,  379) ;  and  the 
case  reported  in  1  Chancery  cases,  134.  But  these  cases,  as  also 
Flood's  case,  Hob.  R.  136  (S.  C.  1  Equity  Abridg.  95,  pi.  6), 
turned  upon  peculiar  circumstances.  Collison's  case  was  upon  a 
devise  in  15  Henry  VIII,  and  was  before  the  statute  of  wills. 
The  other  cases  were  cases  where  the  donees  could  not  take  at 
law,  not  being  properly  described,  or  not  having  a  competent 
capacity  to  take,  so  that  there  was  no  legal  trustee ;  and  yet  the 
devises  were  held  good  as  valid  appointments  under  the  statute  of 
43  Elizabeth.  The  dictum  of  Lord  LOUGHBOROUGH,  in  Attorney- 
General  v.  Bowyer,  3  Ves.  714-726,  was  greatly  relied  on,  where 
he  says  :  "  It  does  not  appear  that  this  Court,  at  that  period 
(that  is,  before  the  statute  of  wills),  had  cognizance  upon  informa- 
tion for  the  establishment  of  charities.  Prior  to  the  time  of  Lord 
ELLESMERE,  as  far  as  tradition  in  times  immediately  following 
goes,  there  were  no  such  informations  as  this  upon  which  I  am 
now  sitting  (an  information  to  establish  a  college  under  a  devise 
before  the  statute  of  Mortmain  of  9  Geo.  2,  ch.  36)  ;  but  they  made 
out  their  case  as  well  as  they  could  at  law.  In  this  suggestion, 
Lord  LOUGHBOROUGH  had  under  his  consideration,  Porter's  case, 
1  Co.  Rep.  16.  But  there  a  devise  was  made  in  32  Henry  VIII, 
to  the  testator's  wife,  upon  condition  for  her  to  .grant  the  lands, 
etc.,  in  all  convenient  speed  after  his  decease,  for  the  mainte- 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  229 

nance  and  continuance  of  a  certain  free-school,  and  almsmen  and 
almswomen  forever.  The  heir  entered  for  and  after  condition 
broken,  and  then  conveyed  the  same  lands  to  Queen  Elizabeth 
in  34  of  her  reign  j  and  the  queen  brought  an  information  of 
intrusion  against  t  Porter  for  the  land  in  the  same  year.  One 
question  was,  whether  the  devise  was  not  to  a  superstitious  use, 
and  therefore  void  under  the  act  of  23  Henry  VIII,  ch.  2,  or 
whether  it  was  good  as  a  charitable  use.  And  it  was  resolved 
by  the  court  that  the  use  was  a  good  charitable  use,  and  that 
the  statute  did  not  extend  to  it.  So  that  here  we  have  a  plain 
case  of  a  charity  held  good,  before  the  statute  of  Elizabeth,  upon 
the  ground  of  the  common  law,  there  being  a  good  devisee  orig- 
inally, although  the  condition  was  broken,  and  the  use  was  for 
charitable  purposes  in  some  respects  indefinitely.  Now,  if  there 
was  a  good  devisee  to  take  as  trustee,  and  the  charity  was  good 
at  the  common  law,  it  seems  somewhat  difficult  to  say  why,  if  no 
legal  remedy  was  adequate  to  redress  it,  the  Court  of  Chancery 
might  not  enforce  the  trust,  since  trusts  for  other  specific  pur- 
poses were  then,  at  least  when  there  were  designated  trustees, 
within  the  jurisdiction  of  chancery. 

There  are,  however,  dicta  of  eminent  judges  (some  of  which 
were  commented  upon  in  the  case  of  4  Wheaton,  1),  which  do 
certainly  support  the  doctrine  that  charitable  uses  might  be  en- 
forced in  chancery  upon  the  general  jurisdiction  of  the  court, 
independently  of  the  statute  of  43  Elizabeth ;  and  that  the  ju- 
risdiction had  been  acted  upon  not  only  subsequent  but  ante- 
cedent to  that  statute.  Such  was  the  opinion  of  Sir  JOSEPH 
JEKYLL  in  Eyre  v.  Countess  of  Shaftsbury,  2  P.  Will.  102,  2 
Equity  Abridg.  710,  pi.  2,  and  that  of  Lord  NQRTHINGTON  in 
Attorney-General  v.  Tancred,  1  Eden.  10  (S.  C.  Ambler,  351,  1 
Win.  Black.  90),  and  that  of  Lord  Chief  Justice  WILMOT  in 
his  elaborate  judgment  in  Attorney- General  v.  Lady  Denning, 
Wilmot's  Notes,  p.  1,  26,  given  after  an  examination  of  all  the 
leading  authorities.  Lord  ELDON,  in  the  Attorney -General  v.  The 
Skinner's  Company,  2  Russ.  407,  intimates  in  clear  terms  his  doubts 
whether  the  jurisdiction  of  chancery  over  charities  arose  solely 
under  the  statute  of  Elizabeth ;  suggesting  that  the  statute  has 
been  perhaps  construed  with  reference  to  a  supposed  antecedent 
jurisdiction  of  the  court,  by  which  void  devises  to  charitable 


230  VIDAL  v.  GIRARD, 


purposes  were  sustained.  Sir  JOHN  LEACH,  in  the  case  of  a 
charitable  use  before  the  statute  of  Elizabeth,  Attorney- General 
v.  The  Master  of  Brentwood  School,  1  Mylne  and  Keen,  376, 
said:  "Although  at  his  time  no  legal  devise  could  be  made  to 
a  corporation  for  a  charitable  use,  yet  lands  so  devised  were  in 
equity  bound  by  a  trust  for  the  charity,  which  a  court  of  equity 
would  then  execute.''  In  point  of  fact,  the  charity  was  so  de- 
creed in  that  very  case,  in  the  12th  year  of  Elizabeth.  But 
what  is  still  more  important,  is  the  declaration  of  Lord  REDES- 
DALE,  a  great  judge  in  equity,  in  the  Attorney- General  v.  The 
Mayor  of  Dublin,  1  Bligh,  312,  347  (1827),  where  he  says: 
"  We  are  referred  to  the  statute  of  Elizabeth  with  respect  to 
charitable  uses,  as  creating  a  new  law  upon  the  subject  of  char- 
itable uses.  That  statute  only  created  a  new  jurisdiction ;  it 
created  no  new  law.  It  created  a  new  and  ancillary  jurisdic- 
tion, a  jurisdiction  created  by  commission,  etc.  ^  but  the  pro- 
ceedings of  that  commission  were  made  subject  to  appeal  to  the 
Lord  Chancellor,  and  he  might  reverse  or  affirm  what  they  had 
done,  or  make  such  order  as  he  might  think  fit  for  reserving  the 
controlling  jurisdiction  of  the  Court  of  Chancery  as  it  existed 
before  the  passing  of  that  statute ;  and  there  can  be  no  doubt 
that,  by  information  by  the  attorney-general  the  same  thing 
might  be  done."  He  then  adds:  "  The  right  which  the  attorney- 
general  has  to  file  an  information,  is  a  right  of  prerogative.  The 
king,  as  parens  patrice,  has  a  right,  by  his  proper  officer,  to  call 
upon  the  several  courts  of  justice,  according  to  the  nature  of 
their  several  jurisdictions,  to  see  that  right  is  done  to  his  sub- 
jects who  are  incompetent  to  act  for  themselves,  as  in  the  case 
of  charities  and  other  cases."  So  that  Lord  REDESDALE  main- 
tains the  jurisdiction  in  the  broadest  terms,  as  founded  in  the 
inherent  jurisdiction  of  chancery  independently  of  the  statute 
of  43  Elizabeth.  In  addition  to  these  dicta  and  doctrines,  there 
is  the  very  recent  case  of  the  Incorporated  Society  v.  Richards, 
I  Drury  and  Warren,  258,  where  Lord  Chancellor  SUGDEN,  in 
a  very  masterly  judgment,  upon  a  full  survey  of  all  the  author- 
ities, and  where  the  point  was  directly  before  him,  held  the  same 
doctrine  as  Lord  REDESDALE,  and  expressly  decided  that  there 
is  an  inherent  jurisdiction  in  equity  in  cases  of  charity,  and  that 
charity  is  one  of  those  objects  for  which  a  court  of  equity  has 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  231 

at  all  times  interfered  to  make  good  that  which  at  law  was  an 
illegal  or  informal  gift ;  and  that  cases  of  charity  in  courts  of 
equity  in  England  were  valid  independently  of  and  previous  to 
the  statute  of  Elizabeth.  , 

Mr.  Justice  BALDWIN,  in  the  case  of  the  will  of  Sarah  Zane, 
which  was  cited  at  the  bar,  and  pronounced  at  April  term  of 
the  Circuit  Court,  in  1833,  after  very  extensive  and  learned  re- 
searches into  the  ancient  English  authorities  and  statutes,  arrived 
at  the  same  conclusion,  in  which  the  district  judge,  the  late  la- 
mented Judge  HOPKINSON,  concurred ;  and  that  opinion  has  a 
more  pointed  bearing  upon  the  present  case,  since  it  included  a 
full  review  of  the  Pennsylvania  laws  and  doctrines  on  the  subject 
of  charities. 

But  very  strong  additional  light  has  been  thrown  upon  this 
subject  by  the  recent  publications  of  the  commissioners  on  the 
public  records  in  England,  which  contain  a  very  curious  and 
interesting  collection  of  the  chancery  recoi'ds  in  the  reign  of 
Queen  Elizabeth,  and  in  the  earlier  reigns.  Among  these  are 
found  many  cases  in  which  the  Court  of  Chancery  entertained 
jurisdiction  over  charities  long  before  the  statute  of  43  Eliza- 
beth ;  and  some  fifty  of  these  cases,  extracted  from  the  printed 
calendars,  have  been  laid  before  us.  They  establish  in  the  most 
satisfactory  and  conclusive  manner,  that  cases  of  charities  where 
there  were  trustees  appointed  for  general  and  indefinite  charities, 
as  well  as  for  specific  charities,  were  familiarly  known  to,  and 
acted  upon,  and  enforced  in  the  Court  of  Chancery.  In  some 
of  these  cases  the  charities  were  not  only  of  an  uncertain  and 
indefinite  nature,  but,  as  far  as  we  can  gather  from  the  imper- 
fect statement  in  the  printed  records,  they  were  also  cases  where 
there  were  either  no  trustees  appointed,  or  the  trustees  were  not 
competent  to  take.  These  records,  therefore,  do  in  a  remarkable 
manner,  confirm  the  opinions  of  Sir  JOSEPH  JEKYLL,  Lord 
NORTHINGTON,  Lord  Chief  Justice  WILMOT,  Lord  REDESDALE, 
and  Lord  Chancellor  SUGDEN.  Whatever  doubts,  therefore, 
might  properly  be  entertained  upon  the  subject  when  the  case 
of  the  Trustees  of  the  Philadelphia  Baptist  Association  v.  Hart's 
Executors,  4  Wheaton,  1,  was  before  this  Court  (1819),  those 
doubts  are  entirely  removed  by  the  late  and  more  satisfactory- 
sources  of  information  to  which  we  have  alluded. 


232  VIDAL  v.  GIRARD, 


If,  then,  this  be  the  true  state  of  the  common  law  on  the 
subject  of  charities,  it  would,  upon  the  general  principle  already 
suggested,  be  a  part  of  the  common  law  of  Pennsylvania.  It 
would  be  no  answer  to  say  that,  if  so,  it  was  dormant,  and  that 
no  court  possessing  equity  powers  now  exists,  or  has  existed,  in 
Pennsylvania,  capable  of  enforcing  such  trusts.  The  trusts 
would  nevertheless  be  valid  in  point  of  law ;  and  remedies  may 
from  time  to  time  be  applied  by  the  Legislature  to  supply  the 
defects.  It  is  no  proof  of  the  non-existence  of  equitable  rights, 
that  there  exists  no  adequate  legal  remedy  to  enforce  them. 
They  may  during  the  time  slumber,  but  they  are  not  dead.  v 

But  the  very  point  of  the  positive  existence  of  the  law  of 
charities  in  Pennsylvania,  has  been  (as  already  stated)  fully 
recognized  and  enforced  in  the  State  courts  of  Pennsylvania,  as 
far  as  their  remedial  powers  would  enable  these  courts  to  act. 
This  is  abundantly  established  in  the  cases  cited  at  the  bar,  and 
especially  by  the  case  of  Witman  v.  Lex,  17  Serg.  and  Raw.  88, 
and  that  of  Sarah  Zaneh  Will,  before  Mr.  Justice  BALDWIN  and 
Judge  HOPKINSON.  In  the  former  case,  the  court  said  "that  it 
is  immaterial  whether  the  person  to  take  be  in  esse  or  not,  or 
whether  the  legatee  were  at  the  time  of  the  bequest  a  corpo- 
ration capable  of  taking  or  not,  or  how  uncertain  the  objects 
may  be,  provided  there  be  a  discretionary  power  vested  any- 
where over  the  application  of  the  testator's  bounty  to  those  ob- 
jects, or  whether  their  corporate  designation  be  mistaken.  If 
the  intention  sufficiently  appears  in  the  bequest,  it  would  be 
valid."  In  the  latter  case,  certain  bequests  given  by  the  will 
of  Mrs.  Zane  to  the  Yearly  Meeting  of  Friends  in  Philadelphia, 
an  incorporated  association,  for  purposes  of  general  and  indef- 
inite charity,  were,  as  well  as  other  bequests  of  a  kindred  na- 
ture, held  to  be  good  and  valid  ;  and  were  enforced  accordingly. 
The  case,  then,  according  to  our  judgment,  is  completely  closed 
in  by  the  principles  and  authorities  already  mentioned,  and  is 
that  of  a  valid  charity  in  Pennsylvania,  unless  it  is  rendered  void 
by  the  remaining  objection  which  has  been  taken  to  it. 

This  objection  is,  that  the  foundation  of  the  college  upon  the 
principles  and  exclusions  prescribed  by  the  testator  is  derogatory 
and  hostile  to  the  Christian  religion,  and  so  is  void,  as  being 
against  the  common  law  and  public  policy  of  Pennsylvania ;  and 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  233 

this  for  two  reasons :  first,  because  of  the  exclusion  of  all  ec- 
clesiastics, missionaries,  and  ministers  of  any  sect  from  holding 
or  exercising  any  station  or  duty  in  the  college,  or  even  visiting 
the  same ;  and  secondly,  because  it  limits  the  instruction  to  be 
given  to  the  scholars  to  pure  morality,  and  general  benevolence, 
and  a  love  of  truth,  sobriety,  and  industry,  thereby  excluding, 
by  implication,  all  instruction  in  the  Christian  religion. 

In  considering  this  objection,  the  Court  are  not  at  liberty  to 
travel  out  of  the  record  in  order  to  ascertain  what  were  the  pri- 
vate religious  opinions  of  the  testator  (of  which  indeed  we  can 
know  nothing),  nor  to  consider  whether  the  scheme  of  education 
by  him  prescribed,  is  such  as  we  ourselves  should  approve,  or  aa 
is  best  adapted  to  accomplish  the  great  aims  and  ends  of  educa- 
tion. Nor  are  we  at  liberty  to  look  at  general  considerations  of 
the  supposed  public  interests  and  policy  of  Pennsylvania  upon 
this  subject,  beyond  what  its  Constitution  and  laws  and  judicial 
decisions  make  known  to  us.  The  question,  What  is  the  public 
policy  of  a  State,  and  what  is  contrary  to  it  ?  if  inqiiired  into 
beyond  these  limits,  will  be  found  to  be  one  of  great  vagueness 
and  uncertainty,  and  to  involve  discussions  which  scarcely  come 
within  the  range  of  judicial  duty  and  functions,  and  upon  which 
men  may  and  will  complexionally  differ;  above  all,  when  that 
topic  is  connected  with  religious  polity,  in  a  country  composed 
of  such  a  variety  of  religious  sects  as  our  country,  it  is  impos- 
sible not  to  feel  that  it  would  be  attended  with  almost  insuper- 
able difficulties,  and  involve  differences  of  opinion  almost  endless 
in  their  variety.  We  disclaim  any  right  to  enter  upon  such  ex- 
aminations, beyond  what  the  State  constitutions  and  laws  and 
decisions  necessarily  bring  before  us. 

It  is  also  said,  and  truly,  that  the  Christian  religion  is  a  part 
of  the  common  law  of  Pennsylvania.  But  this  proposition  is  to 
be  received  with  its  appropriate  qualifications,  and  in  connection 
with  the  bill  of  rights  of  that  State,  as  found  in  its  constitution 
of  government.  The  Constitution  of  1790  (and  the  like  provis- 
ion will,  in  substance,  be  found  in  the  Constitution  of  1776,  and 
in  the  existing  Constitution  of  1838)  expressly  declares,  "That 
all  men  have  a  natural  and  indefeasible  right  to  worship  Al- 
mighty God  according  to  the  dictates  of  their  own  consciences; 
no  man  can  of  right  be  compelled  to  attend,  erect,  or  support 


234  VIDAL  v.  GIRARD, 


any  place  of  worship,  or  to  maintain  any  ministry,  against  his 
consent ;  no  human  authority  can,  in  any  case  whatever,  control 
or  interfere  with  the  rights  of  conscience ;  and  no  preference 
shall  ever  be  given  by  law  to  any  religious  establishments  or 
modes  of  worship."  Language  more  comprehensive  for  the 
complete  protection  of  every  variety  of  religious  opinion  could 
scarcely  be  used ;  and  it  must  have  been  intended  to  extend 
equally  to  all  sects,  whether  they  believed  in  Christianity  or  not, 
and  whether  they  were  Jews  or  infidels.  sSo  that  we  are  com- 
pelled to  admit  that  although  Christianity  be  a  part  of  the  com- 
mon law  of  the  State,  yet  it  is  so  in  this  qualified  sense,  that  its 
Divine  origin  and  truth  are  admitted,  and  therefore  it  is  not  to 
be  openly  and  maliciously  reviled  and  blasphemed  against,  to  the 
annoyance  of  believers  or  the  injury  of  the  public.  Such  was 
the  doctrine  of  the  Supreme  Court  of  Pennsylvania  in,  Updcgraff 
v.  The  Commonwealth,  11  Serg.  and  Raw.  394. 

It  is  unnecessary  for  us,  however,  to  consider  what  would 
be  the  legal  effect  of  a  devise  in  Pennsylvania  for  the  establish- 
ment of  a  school  or  college  for  the  propagation  of  Judaism,  or 
deism,  or  any  other  form  of  infidelity.  Such  a  case  is  not  to  be 
presumed  to  exist  in  a  Christian  country ;  and  therefore  it  must 
be  made  out  by  clear  and  indisputable  proof.  Remote  inferences, 
or  possible  results,  or  speculative  tendencies,  are  not  to  be  drawn 
or  adopted  for  such  purposes.  There  must  be  plain,  positive, 
apd  expressive  provisions,  demonstrating  not  only  that  Chris- 
tianity is  not  to  be  taught,  but  that  it  is  to  be  impugned  or 
repudiated. 

Now,  in  the  present  case,  there  is  no  pretense  to  say  that 
any  such  positive  or  express  provisions  exist,  or  are  even  shad- 
owed forth  in  the  will.  The  testator  does  not  say  that  Christian- 
ity shall  not  be  taught  in  the  college ;  but  only  that  no  ecclesiastic 
of  any  sect  shall  hold  or  exercise  any  station  or  duty  in  the  col- 
lege. Suppose,  instead  of  this,  he  had  said  that  no  person  but 
a  layman  shall  be  an  instructor  or  officer  or  visitor  in  the  col- 
lege, what  legal  objection  could  have  been  made  to  such  a  re- 
striction? And  yet  the  actual  prohibition  is  in  effect  the  same 
in  substance.  But  it  is  asked,  Why  are  ecclesiastics  excluded, 
if  it  is  not  because  they  are  the  stated  and  appropriate  preach- 
ers of  Christianity  ?  The  answer  may  be  given  in  the  very 


IN  THE   SUPREME  COURT  OF  THE  U.  STATES.  235 

words  of  the  testator.  "  In  making  this  restriction,"  says  he, 
11 1  do  not  mean  to  cast  any  reflection  upon  any  sect  or  person 
whatever.  But,  as  there  is  such  a  multitude  of  sects,  and  such 
a  diversity  of  opinion  amongst  them,  I  desire  to  keep  the  tender 
minds  of  the  orphans,  who  are  to  derive  advantage  from  this 
bequest,  free  from  the  excitement  which  clashing  doctrines  and 
sectarian  controversy  are  so  apt  to  produce."  Here,  then,  we 
have  the  reason  given ;  and  the  question  is  not  whether  it  is 
satisfactory  to  us  or  not,  nor  whether  the  history  of  religion  does 
or  does  not  justify  such  a  sweeping  statement ;  but  the  question 
is,  whether  the  exclusion  b?  not  such  as  the  testator  had  a  right, 
consistently  with  the  laws  of  Pennsylvania,  to  maintain,  upon 
his  own  notions  of  religious  instruction.  Suppose  the  testator 
had  excluded  all  religious  instructors  but  Catholics,  or  Quakers, 
or  Swedenbqrgians ;  or,  to  put  a  stronger  case,  he  had  excluded 
all  religious  instructors  but  Jews,  would  the  bequest  have  been 
void  on  that  account  ?  Suppose  he  had  excluded  all  lawyers,  or 
all  physicians,  or  all  merchants,  from  being  instructors  or  visit- 
ors, would  the  prohibition  have  been  fatal  to  the  bequest?  The 
truth  is,  that  in  cases  of  this  sort,  it  is  extremely  difficult  to 
draw  any  just  and  satisfactory  line  of  distinction,  in  a  free 
country,  as  to  the  qualifications  or  disqualifications  which  may 
be  insisted  upon  by  the  donor  of  a  charity  as  to  those  who 
shall  administer  or  partake  of  his  bounty. 

But  the  objection  itself  assumes  the  proposition  that  Chris- 
tianity is  not  to  be  taught,  because  ecclesiastics  are  not  to  be 
instructors  or  officers.  But  this  is  by  no  means  a  necessary  or 
legitimate  inference  from  the  premises.  Why  may  not  laymen 
instruct  in  the  general  principles  of  Christianity,  as  well  as  eccle- 
siastics? There  is  no  restriction  as  to  the  religious  opinions  of 
the  iustruciors  and  officers.  There  may  be.  and  doubtless,  under 
the  auspices  of  the  city  government,  there  will:  always  be,  men 
not  only  distinguished  for  learning  and  talent,  but  for  piety  and 
elevated  virtue,  and  holy  lives  and  characters.  And  we  can  not 
overlook  the  blessings  which  such  men,  by  their  conduct,  as  well 
as  their  instructions,  may — nay,  must — impart  to  their  youthful 
pupils.  Why  may  not  the  Bible,  and  especially  the  New  Testa- 
ment, without  note  or  comment,  be  read  and  taught  as  a  Divine 
revelation  in  the  college — its  general  precepts  expounded,  its 


236  V1DAL  v.  GIRARD, 


evidences  explained,  and  its  glorious  principles  of  morality  in- 
culcated ?  What  is  there  to  prevent  a  work,  not  sectarian,  upon 
the  general  evidences  of  Christianity,  from  being  read  and  taught 
in  the  college  by  lay-teachers  ?  Certainly  there  is  nothing  in 
the  will  that  proscribes  such  studies.  Above  all,  the  testator 
positively  enjoins  "that  all  the  instructors  and  teachers  in  the 
college  shall  take  pains  to  instill  into  the  minds  of  the  scholars 
the  purest  principles  of  morality,  so  that  on  their  entrance  into 
active  life  they  may  from  inclination  and  habit  evince  benevo- 
lence toward  their  fellow-creatures,  and  a  love  of  truth,  sobriety, 
and  industry,  adopting  at  the  same  time  such  religious  tenets  as 
their  matured  reason  may  enable  them  to  prefer."  Now,  it  may 
well  be  asked,  what  is  there  in  all  this,  which  is  positively  en- 
joined, inconsistent  with  the  spirit  or  truths  of  Christianity  ? 
Are  not  these  truths  all  taught  by  Christianity,,  although  it 
teaches  much  more?  Where  can  the  purest  principles  of  mor- 
ality be  learned  so  clearly  or  so  perfectly  as  from  the  New  Tes- 
tament? Where  are  benevolence,  the  love  of  truth,  sobriety, 
and  industry,  so  powerfully  and  irresistibly  inculcated  as  in  the 
Sacred  Volume1?  The  testator  has  not  said  how  these  great 
principles  are  to  be  taught,  or  by  whom,  except  it  be  by  lay- 
men, nor  what  books  are  to  be  used  to  explain  or  enforce  them. 
All  that  we  can  gather  from  his  language  is,  that  he  desired  to 
exclude  sectarians  and  sectarianism  from  the  college,  leaving  the 
instructors  and  officers  free  to  teach  the  purest  morality,  the 
love  of  truth,  sobriety,  and  industry,  by  all  appropriate  means ; 
and  of  course  including  the  best,  the  surest,  and  the  most  im- 
pressive. The  objection,  then,  in  this  view,  goes  to  this :  either 
that  the  testator  has  totally  omitted  to  provide  for  religious  in- 
struction in  his  scheme  of  education  (which,  from  what  has  been 
already  said,  is  an  inadmissible  interpretation),  or  that  it  includes 
but  partial  and  imperfect  instruction  in  those  truths.  In  either 
view,  can  it  be  truly  said  that  it  contravenes  the  known  law  upon 
the  subject  of  charities,  or  is  not  allowable  under  the  article  of 
the  bill  of  rights  already  cited  ?  Is  an  omission  to  provide  for 
instruction  in  Christianity  in  any  scheme  of  school  or  college 
education  a  fatal  defect,  which  avoids  it  according  to  the  law  of 
Pennsylvania?  If  the  instruction  provided  for  is  incomplete  and 
imperfect,  is  it  equally  fatal  ?  These  questions  are  propounded, 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES^  j'U-  237 

because  we  are  not  aware  that  any  thing  exists  in  the  Constitu- 
tion or  laws  of  Pennsylvania,  or  the  judicial  decisions  of  its 
tribunals,  which  would  justify  us  in  pronouncing  that  such  defects 
would  be  so  fatal.  Let  us  take  the  case  of  a  charitable  dona- 
tion to  teach  poor  orphans  reading,  writing,  arithmetic,  geogra- 
phy, and  navigation,  and  excluding  all  other  studies  and 
instruction;  would  the  donation  be  void  as  a  charity  in  Penn- 
sylvania, as  being  deemed  derogatory  to  Christianity  ?  Hitherto 
it  has  been  supposed,  that  a  charity  for  the  instruction  of  the 
poor  might  be  good  and  valid  in  England,  even  if  it  did  not  go 
beyond  the  establishment  of  a  grammar-school.  And  in  Amer- 
ica it  has  been  thought,  in  the  absence  of  any  express  legal 
prohibitions,  that  the  donor  might  select  the  studies,  as  well  as 
the  classes  of  persons,  who  were  to  receive  his  bounty,  without 
being  compellable  to  make  religious  instruction  a  necessary  part 
of  those  studies.  It  has  hitherto  been  thought  sufficient,  if  he 
does  not  require  any  thing  to  be  taught  inconsistent  with 
Christianity. 

Looking  to  the  objection,  therefore,  in  a  mere  judicial  view, 
which  is  the  only  one  in  which  we  are  at  liberty  to  consider  it, 
we  are  satisfied  that  there  is  nothing  in  the  devise  establishing 
the  college,  or  in  the  regulations  and  restrictions  contained 
therein,  which  are  inconsistent  with  the  Christian  religion,  or 
are  opposed  to  any  known  policy  of  the  State  of  Pennsylvania. 

This  view  of  the  whole  matter  renders  it  unnecessary  for  us 
to  examine  the  other  and  Remaining  question,  to  whom,  if  the 
devise  were  void,  the  property  would  belong,  whether  it  would 
fall  into  the  residue  of  the  estate  devised  to  the  city,  or  become 
a  resulting  trust  for  the  heirs  at  law. 

Upon  the  whole,  it  is  the  unanimous  opinion  of  the  Court, 
that  the  decree  of  the  Circuit  Court  of  Pennsylvania  dismissing 
the  bill,  ought  to  be  affirmed;  and  it  is  accordingly  affirmed 
with  costs. 


GIRARD  v.  PHILADELPHIA, 


GIRARD   v.  PHILADELPHIA. 

[Decided  at  the  December  term,  1868,  of  the  Supreme  Court  of  the  United 
States,  Associate  Justice  ROBERT  C.  GRIER  delivering  the  opinion.  Reported 
in  7  Wallace,  i.] 

GIRARD  WILL  CASE.— No.  2. 

Where  a  testator  devises  the  income  of  property  in  trust  primarily  for  one  object, 
and  if  the  income  is  greater  than  the  object  needs,  the  surplus  to  others 
(secondary  ones),  a  bill  in  the  nature  of  a  bill  quia  timit,  and  in  anticipation 
of  an  incapacity  in  the  trusts  to  be  executed  hereafter,  and  when  a  surplus 
arises  (there  being  no  surplus  now,  nor  the  prospect  of  any),  will  not  lie 
by  heirs  at  law  (supposing  them  otherwise  entitled,  which  here  they  were 
decided  not  to  be)  to  have  this  surplus  appropriated  to  them  on  the  ground 
of  the  secondary  trusts  having,  subsequently  to  the  testator's  death,  become 
incapable  of  execution. 

Neither  the  identity  of  a  municipal  corporation,  nor  its  right  to  hold  property 
devised  to  it,  is  destroyed  by  a  change  of  its  name,  an  enlargement  of  its 
area,  or  an  increase  in  the  number  of  its  corporators.  And  these  are  changes 
which  the  Legislature  has  power  to  make. 

Under  the  will  of  Stephen  Girard  [for  the  terms  of  which  see  preceding  case  of 
Vidal  v.  Girard,  herein,  page  214],  the  whole  final  residuary  of  his  estate 
was  left  to  the  old  city  of  Philadelphia  in  trust,  to  apply  the  income,  1.  For 
the  maintenance  and  improvement  of  the  college  as  a  primary  object ;  and 
after  that,  2.  To  improve  its  police;  3.  To  improve  the  city  property  and 
the  general  appearance  of  the  city,  and  to  diminish  the  burden  of  taxation, — 
the  court  having  declared  that  so  long  as  any  portion  of  the  income  should 
be  found  necessary  for  improvement  and  maintenance  of  the  college,  the 
second  and  third  objects  could  claim  nothing,  and  the  whole  income  being, 
in  fact,  necessary  for  the  college.  Held,  1.  That  no  question  arose  at  this 
time  as  to  whether  the  new  city  should  apply  the  surplus  under  the  trusts 
for  the  secondary  objects  to  the  benefit  of  the  new  city,  or  to  that  portion 
of  it  alone  embraced  in  the  limits  of  the  old  one;  2.  That  whether  or  not 
the  trusts  being,  as  was  decided  in  Vidal  v.  Girard  [preceding,  page  214], 
in  themselves  valid,  Girard's  heirs  could  not  inquire  or  contest  the  right  of 
the  city  corporation  to  take  the  property  or  to  execute  the  trusts,  this  right 
belonging  to  the  State  alone  as  parent  patrice. 

APPEAL  from  the  Circuit  Court  for  the  Eastern  District  of 
Pennsylvania — the  case  as  presented  by  the  bill  and  answer 
being  thus : 

The  city  of  Philadelphia,  as  originally  laid  out  in  1683,  and 
as  incorporated  in  1701,  was  situated  upon  a  rectangular  plot 
of  ground,  bounded  in  one  direction  by  two  streets,  called  Vine 
and  South,  a  mile  apart,  and  in  the  other  by  two  rivers  (the 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  239 

Delaware  and  the  Schuylkill),  two  miles  apart — the  corporate 
title  of  the  city  being  "the  Mayor,  Aldermen,  and  Citizens  of 
Philadelphia."  Upon  the  neck  of  land  above  described  the  cor- 
porate city  continued  to  be  contained  until  1854;  the  inhabitants 
outside  or  adjoining  it  being  incorporated  at  different  times,  and 
as  their  numbers  extended,  into  bodies  politic,  under  different 
names,  by  the  State  Legislature,  and  with  'the  city,  forming  the 
county  of  Philadelphia.  In  1798,  the  Revolution  having  dis- 
solved the  old  corporation,  the  Legislature  incorporated  the  city 
with  larger  powers,  and  prior  to  1854,  nearly  twenty  acts  had 
been  passed  altering  that  law,  and  forming,  the  whole  of  them, 
what  was  popularly  called  the  charter  of  the  city  j  but  as  already 
said,  from  1683  to  1854,  the  city  limits  were  the  same. 

[In  this  state  of  things  Stephen  Girard,  in  1831,  left  by  will  the  real  and 
personal  residue  of  an  estate  of  some  millions  of  dollars,  to  "  the  Mayor,  Alder- 
iiien,  and  Citizens  of  Philadelphia,"  in  trust,  to  found  a  college  (for  the  terms 
of  which  see  the  preceding  case  of  Vidal  \.  Girard,  page  214),  with  a  residuary 
disposition  as  shown  therein  and  by  the  syllabus  in  the  present  case.] 

The  above-described  city  corporation,  "the  Mayor,  Alder- 
men, and  Citizens  of  Philadelphia,"  having  accepted  the  trust, 
and  built  and  furnished  the  college  and  out-buildings,  administered 
the  charity  through  its  organs  until  1854.  By  that  time  twenty- 
eight  municipal  corporations,  making  the  residue  of  the  county, 
had  grown  up  around  the  old  "city,"  some  near,  some  far  off, 
some  populous,  some  occupied  yet  by  farms.  They  comprised 
"districts,"  boroughs,  townships;  were  of  various  territorial  ex- 
tent, and  differed  in  the  details  of  their  respective' organizations. 
In  the  year  named,  the  Legislature  of  Pennsylvania  passed  what 
is  known  in  Philadelphia  as  the  Consolidation  Act. 

By  this  act  the  administration  of  all  the  concerns  of  the 
twenty-nine  corporations,  including  their  debts,  taxes,  property, 
police,  and  whatever  else  pertained  to  municipal  office,  and  also 
the  government  of  the  county  itself,  were  consolidated  into  one. 
All  the  powers,  rights,  privileges,  and  immunities  incident  to  a 
municipal  corporation,  and  necessary  for  the  proper  government 
of  the  same,  and  those  of  the  "Mayor,  Aldermen,  and  Citizens  of 
Philadelphia,"  and  "all  the  powers,  rights,  privileges,  and  immu- 
nities possessed  and  enjoyed  by  the  other  twenty-eight  corporate 
bodies,  which,  with  the  old  city,  made  up  the  county  of  Philadel- 


240  GIRARD  v.  PHILADELPHIA, 

phia  ;"  and  also  ll  the  board  of  police  of  the  police  district,  the  com- 
missioners of  the  county  of  Philadelphia,  the  treasurer  and  audi- 
tor thereof,  the  county  boards,  the  commissioners  of  the  sinking 
fund,  and  the  supervisors  of  the  townships,"  were,  by  virtue 
of  the  process  of  consolidation,  vested  in  "  the  city  of  Philadel- 
phia, as  established  by  this  act."  A  police  board  was  to  fix  the 
whole  number  of  policemen  "for  the  service  of  the  whole  city."" 
The  " right,  title,  and  interest"  of  the  "  several  municipal  cor- 
porations mentioned  in  this  act,  of,  in,  and  to  all  the  lands,  ten- 
ements, and  hereditaments,  goods,  chattels,  moneys,  effects,  and 
of,  in,  and  to  all  other  property  and  estate  whatsoever  and 
wheresoever,  belonging  to  any  or  either  of  them,"  were  "  vested 
in  the  city  of  Philadelphia ;"  and  all  "  estates  and  incomes  held 
in  trust  by  the  county,  present  city,  and  each  of  the  townships, 
districts,  and  other  municipal  corporations,  united  by  this  act," 
were  "  vested  in  the  city  of  Philadelphia,  upon  and  for  the  same 
uses,  trusts,  limitations,  charities,  and  conditions  as  the  same  are 
now  held  by  the  said  corporations  respectively."  The  act  also 
declared  that  the  new  city  corporation  should  be  "  vested  with 
ah1  the  powers,  rights,  privileges,  and  immunities"  of  the  old 
one.  The  "net  debt  of  the  county  of  Philadelphia,  and  the 
several  net  debts  of  the  guardians  for  the  relief  and  employment 
of  the  poor  of  the  city  of  Philadelphia,"  and  of  the  Board  of 
Health,  "  and  of  the  controllers  of  the  public  schools,"  and  of 
such  of  the  said  twenty-nine  municipalities,  eighteen  being  enu- 
merated, as  had  contracted  debts,  were  consolidated  and  formed 
into  one  debt,  to  be  called  the  debt  of  the  city  of  Philadelphia, 
in  lieu  of  the  present  separate  debts  so  consolidated.  The  con- 
solidation was  carried  into  full  effect.  The  act"  provided  that 
the  corporators  of  the  new  city,  having  elected  a  mayor  and 
councils,  the  councils  should  direct  the  mayor  to  appoint  a  day 
when  "  all  the  powers,  rights,  privileges,  and  immunities  pos- 
sessed and  enjoyed  by  the  various  corporations,  and  those  also 
of  the  old  city,  should  cease  and  terminate ;"  and  the  councils 
did  accordingly,  by  resolution,  direct  the  mayor  to  "  issue  his 
proclamation  forthwith  dissolving  the  different  corporations  super- 
seded by  this  act,  to  take  effect  on  the  30th  instant ;"  and  in  obe- 
dience thereto  the  mayor,  by  public  proclamation,  dated  the  24th 
June,  1854,  proclaimed  that  "all  the  powers,  rights,  privileges, 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  241 

and  immunities  possessed  and  enjoyed  "  by  the  now  late  twenty- 
eight  municipalities,  and  "  by  the  present  mayor  and  council- 
men  "  of  the  city  of  Philadelphia,  from  the  said  30th  day  of 
June,  1854,  should  "  cease  and  determine." 

The  old  city  covered  about  two  square  miles ;  the  new  one, 
which  covered  the  whole  county  of  Philadelphia,  about  a  hun- 
dred and  twenty-nine.  In  point  of  population,  however,  the 
old  city  embraced  a  fourth  or  fifth  part  of  all  the  inhabitants  of 
the  new  one.  In  the  popular  branch  of  the  new  city  legislature, 
composed  of  eighty-five  members,  the  old  city  enjoyed  twenty. 
In  the  higher  branch  it  had  six  members,  the  residue  having 
eighteen.  The  debt  of  the  old  city  had  been  small,  and  its  credit 
high.  By  the  consolidation  the  debt  became  large. 

In  the  erection  and  furnishing  of  the  college  and  out-build- 
ings, the  whole  fund  of  $2,000,000  had  been  exhausted,  and  the 
whole  income  of  the  final  residuary  fund  was  now  habitually 
drawn  upon  for  the  maintenance  and  education  of  the  orphans, 
numbering,  at  the  time  when  the  bill  was  filed,  about  330,  and 
limited  to  this  number,  because  the  income  from  even  the  resid- 
uary fund  was  inadequate  to  the  maintenance  and  education  of 
a  greater  number.  However,  a  part  of  Girard's  estate  consisted 
of  coal  lands  in  Pennsylvania,  not  yet  ripe  for  being  worked, 
whose  value  was  largely  increased,  and  from  which,  when  it 
should  be  found  expedient  to  work  them,  the  revenue  would, 
perhaps,  be  very  great. 

In  this  state  of  things,  certain  heirs  of  Girard  filed  their  bill 
in  the  court  below,  praying  for  an  account ;  and  that  a  master 
might  be  appointed  to  inquire  into  the  gross  value  and  their 
present  capacity  for  annual  yield  of  the  coal  lands,  and  if  such 
an  inquiry  showed  a  capacity  for  affording  income  "  immensely  " 
beyond  all  the  wants  of  the  college,  and  all  proper  charges  on 
the  estate,  that  then,  if  the  court  should  be  of  opinion  that  the 
whole  residuary  estate  was  applicable  to  the  college  (a  matter 
denied  by  the  bill),  that  it  would  decree  "  such  surplus,  found 
to  exist  beyond  and  beside  all  possible  and  lawful  wants  of  the 
college,"  etc.,  to  the  complainants. 

The  court  below  dismissed  the  bill,  which  action  of  it  was  the 

ground  of  the  appeal. 

16 


242  GIRARD  v.  PHILADELPHIA, 

Mr.  C.  Inyersott,  for  the  appellants.  Messrs.  Meredith  and 
Olmstead,  for  appellee. 

Mr.  Justice  GRIER  delivered  the  opinion  of  the  Court ;  and 
after  observing  that  the  attempt  to  restrain  the  alienation  of  the 
realty,  being  inoperative,  could  not  affect  the  validity  of  the  de- 
vise, and  that  the  income  of  the  whole  residuary  was  devoted  to 
the  three  objects  stated  by  the  testator,  the  college  being  the 
11  primary  object,"  and  that  so  long  as  any  portion  of  this  resid- 
uary fund  should  be  found  necessary  for  "  its  improvement  and 
maintenance,"  on  the  plan  and  to  the  extent  declared  in  the 
will,  the  second  and  third  objects  could  claim  nothing :  proceeded 
as  follows : 

The  bill  admits  it  to  be  a  valid  charity,  and  claims  only  the 
residue  after  that  is  satisfied.  Now,  it  is  admitted  (for  it  has 
been  so  decided,  Vidal  v.  Girard,  antecedent,  "page  214)  that 
till  February,  1854,  the  corporation  was  vested  with  a  complete 
title  to  the  whole  residue  of  the  estate  of  Stephen  Girard,  sub- 
ject to  these  charitable  trusts,  and  consequently,  at  that  date, 
his  heirs  at  law  had  no  right,  title,  or  interest  whatsoever  in  the 
same.  But  the  bill  alleges  that  the  act  of  the  Legislature  of 
that  date  (comjnonly  called  the  u  Consolidation  Act "),  which 
purports  to  be  a  supplement  to  the  original  act  incorporating  the 
city,  has  either  dissolved  or  destroyed  the  identity  of  the  orig- 
inal corporation,  and  it  is  consequently  unable  any- longer  to  ad- 
minister the  trusts.  Now,  if  this  were  true,  the  only  consequence 
would  be,  not  that  the  charities  or  trust  should  fail,  but  that  the 
chancellor  should  substitute  another  trustee. 

It  is  not  insisted  that  the  mere  change  or  abbreviation  of  the 
name  has  destroyed  the  identity  of  the  coi-poration.  The  bill 
even  admits  that  a  small  addition  to  its  territory  and  jurisdiction 
might  not  have  that  effect,  but  that  the  annexation  of  twenty- 
nine  boroughs  and  townships  has  smothered  it  to  death,  or  ren- 
dered it  utterly  incapable  of  administering  trusts  or  charities 
committed  to  it  when  its  boundaries  were  Vine  and  South  Streets 
and  the  two  rivers.  There  is  nothing  to  be  found  in  the  letter 
or  spirit  of  this  act  which  shows  any  intention  in  the  Legislature 
to  destroy  the  original  corporation,  either  by  changing  its  name, 
enlarging  its  territory,  or  increasing  the  number  of  its  corporators. 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  243 

On  the  contrary,  u  all  its  powers,  rights,  privileges,  and  immu- 
nities/' etc.,  "  are  continued  in  full  vigor  and  effect.5'  It  pro- 
vides, also,  that  "all  the  estates,"  etc.,  held  by  any  of  the 
corporations  united  by  the  act,  shall  be  held  "  upon  and  for  the 
same  uses,  trusts,  limitations,  charities,  and  conditions  as  the 
same  were  then  held." 

By  the  act  of  4th  of  April,  1852,  the  corporation  was  {t  au- 
thorized to  exercise  all  such  jurisdiction,  to  enact  all  such 
ordinances,  and  to  do  and  execute  all  such  acts  and  things 
whatsoever,  as  may  be  necessary  for  the  full  and  entire  accept- 
ance, execution,  and  prosecution  of  any  and  all  the  devises,  "be- 
quests, trusts,  and  provisions  contained  in  said  will."  It  may 
also  "provid-e,  by  ordinance  or  otherwise,  for  the  election  and 
appointment  of  such  officers  and  agents  as  they  may  deem  essen- 
tial to  the  due  execution  of  the  duties  and  trusts  enjoined  and 
created  by  the  will  of  the  late  Stephen  Girard." 

Now,  it  can  not  be  pretended  that  the  Legislature  had  not 
the  power  to  appoint  another  trustee  if  the  act  had  dissolved  the 
corporation,  or  to  continue  the  rights,  duties,  trusts,  etc.,  in  the 
enlarged  corporation.  It  has  done  so,  and  has  given  the  widest 
powers  to  the  trustee  to  administer  the  trusts  and  charities, 
according  to  the  intent  of  the  testator,  as  declared  in  his  will. 

The  Legislature  may  alter,  modify,  or  even  annul  the  fran- 
chises of  a  public  municipal  corporation,  although  it  may  not 
impose  burdens  on  it  without  its  consent.  In  this  case,  the  cor- 
poration has  assented  to  accept  the  changes,  assume  the  bur- 
dens, and  perform  the  duties  imposed  upon  it ;  and  it  is  difficult 
to  conceive  how  they  can  have  forfeited  their  right  to  the  char- 
ities which  the  law  makes  it  their  duty  to  administer.  The 
objects  of  the  testator's  charity  remain  the  same  while  the  city, 
large  or  small,  exists;  the  trust  is  an  existing  and  valid  one; 
the  trustee  is  vested  by  law  with  the  estate,  and  the  fullest 
power  and  authority  to  execute  the  trust. 

Whatever  the  fears  or  fancy  of  the  complainants  may  be,  as 
to  the  moral  ability  of  the  overgrown  corporation,  there  is  no 
necessity  or  natural  inability  which  prohibits  it  from  adminis- 
tering this  charity  as  faithfully  as  it  could  before  its  increase. 
In  fact,  it  is  a  matter  in  which  the  Complainants  have  no  con- 
cern whatever,  or  any  right  to  intervene.  If  the  trust  be  not 


244  GIRARD  v.  PHILADELPHIA, 

rightly  administered,  the  cestui  que  trust,  or  the  sovereign,  may 
require  the  courts  to  compel  a  proper  execution. 

In  the  case  of  Vidal  (preceding,  page  226),  the  Supreme 
Court  say  that,  "  if  the  trusts  were  in  themselves  valid  in  point 
of  law,  it  is  plain  that  neither  the  heirs  of  the  testator,  nor  any 
other  private  person,  would  have  any  right  to  inquire  into  or 
contest  the  right  of  the  corporation  to  take  the  property  or  ex- 
ecute the  trust ;  this  would  exclusively  belong  to  the  State  in 
its  sovereign  capacity,  and  as  parens  patri<z,  and  its  sole  dis- 
cretion." 

This  is  not  an  assertion  that  the  Legislature,  as  parens  pa- 
trice,  may  interfere,  by  retrospective  acts,  to  exercise  the  cypres 
power,  which  has  become  so  odious  from  its  application  in  En- 
gland to  what  were  called  superstitious  uses.  Baxter's  Case,  and 
other  similar  ones,  can  not  be  precedents  where  there  is  no  Es- 
tablished Church  which  treats  all  dissent  as  superstition.  But 
it  can  not  admit  of  a  doubt  that,  where  there  is  a  valid  devise 
to  a  corporation,  in  trust  for  charitable  purposes,  unaffected  by 
any  question  as  to  its  validity  because  of  superstition,  the  sov- 
ereign may  interfere  to  enforce  the  execution  of  the  trusts,  either 
by  changing  the  administrator,  if  the  corporation  be  dissolved, 
or,  if  not,  no  modifying  or  enlarging  its  franchises,  or  change 
in  its  name,  while  its  identity  remains,  can  affect  its  rights  to 
hold  property  devised  to  it  for  any  purpose.  Nor  can  a  valid 
vested  estate,  in  trust,  lapse  or  become  forfeited  by  any  miscon- 
duct in  the  trustee,  or  inability  in  the  corporation  to  execute  it, 
if  such  existed.  Charity  never  fails ;  and  it  is  the  right,  as 
well  as  the  duty,  of  the  sovereign,  by  its  courts  and  public 
officers,  as  also  by  legislation  (if  needed),  to  have  the  charities 
properly  administered. 

Now,  there  is  no  complaint  here  that  the  charity,  so  far  as 
regards  the  primary  and  great  object  of  the  testator,  is  not 
properly  administered ;  and  it  does  not  appear  that  there  now 
is,  or  ever  will  be,  any  residue  to  apply  to  the  secondary  objects. 
If  that  time  should  ever  arrive,  the  question,  whether  the  char- 
ity shall  be  so  applied  as  to  have  the  "effect  to  diminish  the 
burden  of  taxation"  on  all  the  corporation,  or  only  those  within 
the  former  boundaries  of  the  city,  will  have  to  be  decided.  The 
case  of  Soohan  v.  The  City,  33  Pennsylvania  State,  9,  does  not 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES^  A245 


decide  it;  nor  is  this  Court  bound  to  decide  it.  The  answer 
shows  how  it  may  be  done,  and  the  corporation  has  ample  power 
conferred  on  it  to  execute  the  trust  according  to  either  hypoth- 
esis;  and,  .if  further  powers  were  necessary,  the  Legislature, 
executing  the  sovereign  power,  can  certainly  grant  them.  In 
the  mean  time  the  heirs  at  law  of  the  testator  have  no  concern 
in  the  matter,  or  any  right  to  interfere  by  a  bill  quid  timet. 
Their  anticipations  of  the  future  perversion  of  the  charity  by 
the  corruption  or  folly  of  the  enlarged  corporation,  and  the 
moral  impossibility  of  its  just  administration,  are  not  sufficient 
reasons  for  the  interference  of  this  Court  to  seize  upon  the  fund, 
or  any  part  of  it,  and  to  deliver  it  up  to  the  complainants,  who 
never  had,  and  by  the  will  of  Stephen  Girard  were  not  intended 
to  have,  any  right,  title,  or  claim  whatsoever  to  the  property. 
In  fine,  the  bill  was  rightly  dismissed,  because : 

1.  The  residue  of  the  estate  of  Stephen  Girard,  at  the  time 
of  his  death,  was,  by  his  will,  vested  in  the  corporation  on  valid 
legal  trust,  which  it  was  fully  competent  to  execute. 

2.  By  the  supplement  to  the  act  incorporating  the  city  (com- 
monly called  the  "  Consolidation  Act "),  the  identity  of  the  cor- 
poration is  not  destroyed ;  nor  can  the  change  in  its  name,  the 
enlargement  of  its  area,  or  increase  in  the  number  of  its  corpo- 
rators, affect  its  title  to  property  held  at  the  time  of  such  change. 

3.  The    corporation,  under  its   amended  charter,  has  every 
capacity  to  hold,  and  every  power  and  authority  necessary  to 
execute  the  trusts  of  the  will. 

4.  That  the  difficulties  anticipated  by  the  bill,  as  to  the  ex- 
ecution of  the  secondary  trusts,  are  imaginary.     They  have  not 
arisen,  and  most  probably  never  will. 

5.  And  if  they  should,  it  is  a  matter,  whether  probable  or 
improbable,  with  which  the  complainants  have  no  concern,  and 
can  not  have  in  any  possible  contingency  (a). 

DECKEE  AFFIRMED  WITH  COSTS. 

(a)  A  THIRD  case  involving  the  validity  and  construction  of  the  Girard  will 
(or,  rather,  preceding  this  last  one  in  the  Federal  courts),  is  that  of  Philadelphia 
v.  The  Heirs  of  Girard,  reported  in  45  Pennsylvania  State,  9.  This  was  an  eject- 
ment brought  by  the  heirs,  in  Schuylkill  County,  for  the  twenty  tracts  of  coal 
lands,  and  judgment  below  was  in  their  favor.  On  error  to  the  Supreme  Court, 
the  judgment  below  was  reversed,  LOURIE,  C.  Justice,  delivering  the  opinion, 
holding  that  the  decision  in  2  Howard  settled  the  controversy. 


246 —J>U0         ROBERTS  v.  ROBERTS, 


ROBERTS  v.  ROBERTS. 

{Decided  at  the  Summer  term,  1870,  of  the  Court  of  Appeals  of  Ken- 
tucky, Judge  M.  R.  HARDIN  delivering  the  opinion  of  the  Court.  Reported 
in  7  Bush,  100.] 

APPEAL  FROM  HARRISON  CIRCUIT  COURT. 

la  this  case  an  estate  devised  to  a  widow  for  life,  with  remainder  to  children, 
was  disposed  of  by  consent  of  all  parties  interested,  and  the  proceeds  were 
deposited  with  one  of  the  children,  to  be  held  subject  to  the  use  of  the  life- 
tenant,  in  lieu  of  the  estate  so  disposed  of.  The  proceeds  were  so  held  for 
many  years,  and  until  after  the  death  of  the  life-tenant,  when  the  devisees 
in  remainder  instituted  a  suit,  in  which  a  distribution  of  the  fund  was 
sought.  The  defendant,  who  received  and  held  the  fund  as  aforesaid, 
pleaded  the  statute  of  limitations.  Held,  that  the  fund  wfts  held  in  lieu  of 
the  estate  disposed  of,  and  subject  to  the  life-estate  and  ultimate  rights  of 
the  remainder-men;  that  it  was  so  held,  notwithstanding  the  desire  of  some 
of  the  devisees  in  remainder  that  he  should  distribute  the  funds  amongst 
them  during  the  life  of  the  life-tenant;  and  that  the  statute  of  limitations  did 
not  commence  to  run  until  the  termination  of  the  life-estate. 

When  a  person  holding  a  life-estate  in  property  converts  the  entire  estate  to  hia 
own  use,  with  the  effect  of  defeating  the  enjoyment  of  the  estate  in  remain- 
der, he  becomes  immediately  responsible  to  the  remainder-men,  who  have  a 
right  to  recover  against  him  the  full  value  of  their  estate ;  and  the  cause 
of  action,  which  consists  in  the  injury  to  the  estate  in  remainder,  accrues 
as  soon  as  the  wrong  has  been  committed,  and  from  that  time,  therefore, 
limitation  runs,  Coffey  v.  Wilkerson,  1  Metcalfe,  101. 

When  the  property  is  sold,  whether  by  the  tenant  for  life  or  a  volunteer  under 
him,  with  the  assent  of  the  remainder-men, ^n  order  that  the  proceeds  may 
be  held  in  lieu  of  the  property  for  the  ultimate  benefit  of  the  owners  in  re- 
mainder, the  transaction  will  constitute  an  express  trust  between  the  holder 
of  the  fund  and  those  who  will  finally  be  entitled  to  it;  and  as  in  such  a 
case  there  is  no  adverse  possession  of  the  fund,  the  trust  will  not  be  barred 
by  any  length  of  time,  Hill  on  Trustees,  263;  Lewin  on  Trusts,  744;  17  B. 
Monroe,  446. 

In  case  of  an  express  continuing  trust,  the  statute  of  limitations  does  not  begin 
to  run,  as  against  the  cestui  que  trust  and  in  favor  of  the  trustee,  until  there 
has  been  some  open  express  denial  of  the  right  of  the  former,  and  what 
amounts  to  an  adverse  possession  or  assertion  of  right  on  the  part  of  the 
latter,  Hill  on  Trustees,  264;  Bohannoris  Heirs  v.  Sthreshleys  Executors,  2  B. 
Monroe,  437. 

W.  W.  Trimlk,  for  appellant.     John  0.  Hodges  and  J.  M. 
Givens,  for  appellee. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  247 

JUDGE  HAEDIN  delivered  the  opinion  of  the  Court:  Hugh 
Roberts,  Sr.,  died,  in  1826,  leaving  a  will  by  which  he  devised 
his  whole  estate  which  might  remain  after  the  payment  of  debts 
consisting  of  a  small  tract  of  land,  several  slaves,  and  some  per- 
sonal property  to  his  wife,  Elizabeth  Roberts,  for  life,  and  after- 
ward to  be  equally  divided  among  his  "surviving  children." 

The  tenant  for  life  lived  upon  the  land  till  her  death,  which 
occurred  in  1864,  her  son,  Barnett  Roberts,  residing  with  her, 
and  having  management  of  the  farm  and  such  of  the  slaves  and 
other  property  as  remained  in  her  possession  under  the  will. 

The  testator  had  eight  children  living  at  his  death,  part  of 
whom  died,  leaving  issue  during  the  life  of  Elizabeth  Roberts, 
and  none  of  them  survived  her  except  said  Barnett  Roberts,  and 
Hugh  Roberts,  Jr.,  Henry  Roberts,  and  America  Roberts.  It 
appears  that  about  1838  three  of  the  slaves,  named  Joe,  Milly, 
and  Mary,  being  of  vicious  character  or  ungovernable,  were  sold 
to  a  slave-trader  for  $1,225,  with  the  assent  or  active  concur- 
rence of  said  Elizabeth  Roberts  and  all  of  the  children  of  her 
late  husband  who  were  then  living,  and  the  money  was  paid  to 
Barnett  Roberts,  to  be  held  subject  to  the  use  of  Elizabeth 
Roberts  in  lieu  of  the  slaves,  and  that  he  kept  it  with  its  accu- 
mulating interest  for  many  years  on  loan  in  the  hands  of  Benson 
Roberts ;  and  some  time  afterward  a  slave  named  Brice  was  also 
sold,  and  part  of  the  price  retained  by  Barnett  Roberts.  It 
seems  also  that  said  Barnett,  about  1844,  purchased  from  his 
brother,  William  Roberts,  such  interest  as  the  latter  had  in  re- 
mainder in  the  estate  of  Hugh  Roberts,  Sr.,  and  that  he  after- 
ward became  the  purchaser  of  the  interest  of  Hugh  Roberts,  Jr.; 
and  that  in  December,  1858,  said  Elizabeth  transferred  to  him 
all  her  interest  in  the  estate  as  tenant  for  life  under  the  will  of 
Hugh  Roberts,  deceased. 

On  the  10th  day  of  March,  1865,  Barnett  Roberts,  being 
then  the  administrator  of  the  estate  of  said  Elizabeth,  brought 
this  suit  in  equity,  seeking  a  construction  of  the  will  of  Hugh 
Roberts,  deceased,  and  the  judgment  of  the  court  determining 
the  rights  of  himself  and  the  other  devisees  in  remainder  in  the 
estate  which  remained  in  his  possession.  By  cross-pleadings, 
filed  by  America  Roberts  and  others,  they  sought  to  hold  the 
plaintiff  responsible  for  the  money  in  his  hands  arising  from  the 


248  ROBERTS  P.  ROBERTS, 

sales  of  the  slaves;  and  in  his  reply  he  pleaded  the  statute  of 
limitations  in  bar  of  the  claim. 

The  court  adjudged  that,  under  the  will  of  Hugh  Roberts, 
deceased,  his  four  children,  Barnett,  Henry,  Hugh,  and  America 
only,  who  survived  his  widow,  took  the  estate  remaining  at  her 
death ;  and  that,  although  the  money  arising  from  the  sale  of  the 
slaves  came  to  the  plaintiff's  hands,  the  claim  against  him  for  it 
was  barred  by  limitation. 

On  this  appeal,  which  is  prosecuted  by  America  Roberta 
alone,  the  principal  question  presented  for  the  decision  of  this 
Court  is,  Did  the  statute  of  limitations  constitute  a  bar  to  the 
claim  for  the  proceeds  of  the  slaves? 

In  Coffey  v.  WH.kersony  etc.,  1  Met.  101,  it  was  held,  as  we 
think,  upon  well-settled  principles,  that  where  a  person  holding 
the  life-estate  in  property  converts  not  merely  that  estate,  but 
the  absolute  and  entire  estate  in  the  property  to  his  own  use, 
and  that  with  the  effect  of  defeating  the  enjoyment  of  the  es- 
tate in  remainder,  he  becomes  immediately  responsible  for  the 
act  to  the  persons  entitled  in  remainder,  who  have  a  right  to 
recover  against  him  the  fall  value  of  their  estate ;  and  that  the 
cause  of  action,  which  consists  in  the  injury  to  the  estate  in  re- 
mainder, accrues  as  soon  as  the  wrong  has  been  committed,  and 
from  that  time  therefore  limitation  runs. 

But  the  application  of  this  doctrine  must  in  particular  cases 
depend  on  the  nature  of  the  act  of  conversion,  and  its  immediate 
effects  on  the  rights  of  the  persons  owning  the  property  in  re- 
mainder. For  if  the  property  be  sold,  whether  by  the  tenant 
for  life  or  a  volunteer  under  him,  with  the  assent  of  the  remain- 
der-men, in  order  that  the  proceeds  may  be  held  in  lieu  of  the 
property  for  the  ultimate  benefit  of  the  owners  in  remainder,  the 
transaction  will  constitute  an  express  trust  between  the  holder 
of  the  funds  and  those  who  will  finally  be  entitled  to  it ;  and,  as 
in  such  case  there  is  no  adverse  possession  of  the  funds,  the 
trust  will  not  be  barred  by  any  length  of  time,  Hill  on  Trustees, 
263;  Lewin  on  Trusts  and  Trustees,  744;  17  B.  Monroe,  446. 

It  has  been  often  and  uniformly  ruled,  that  in  the  case  of  an 
express  continuing  trust  the  statute  of  limitations  does  not  begin 
to  run,  as  against  the  cestui  que  trust  and  in  favor  of  the  trustee, 
until  there  has  been  some  open  express  denial  of  the  right  of  the 


IN  THE  KENTUCKY  COURT  OF  APPEALS 


former,  and  what  amounts  to  an  adverse  possession  or  assertion 
of  right  on  the  part  of  the  latter,  Hill  on  Trustees,  264 ;  Bo- 
hannon's  Heirs  v.  StJireshley's  Executors,  2  B.  Monroe,  437  (a). 

In  this  case  neither  the  allegations  of  the  reply,  nor  the 
proof  as  to  the  receipt  and  control  of  the  price  of  the  slaves, 
Joe,  Milly,  and  Mary,  by  the  appellee,  import  more  than  that 
the  money  came  to  his  hands  in  pursuance  of  an  arrangement 
of  all  the  parties  interested,  to  be  held  in  lieu  of  the  slaves, 
subject  to  the  life-estate  of  Elizabeth  Roberts,  and  the  ultimate 
rights  of  the  devisees  in  remainder  under  the  will  of  Hugh 
Roberts,  deceased  ;  and  that  he  so  held  it,  notwithstanding  the 
desire  of  some  of  the  devisees  that  he  should  distribute  it  among 
them  during  the  life  of  Elizabeth  Roberts. 

We  are,  therefore,  of  the  opinion  that  the  court  erred  in 
adjudging  the  claim  for  the  proceeds  of  the  slaves,  Joe,  Milly, 
and  Mary,  to  be  barred  by  limitation.  But  as  to  the  balance  of 
the  price  of  the  slave  Brice,  the  sums  admitted  to  have  been  re- 
ceived by  the  appellant  and  others,  of  the  money  derived  by  the 
sale  of  Brice,  seem  to  have  been  in  satisfaction  of  their  interest 
in  that  fund,  and  we  perceive  no  sufficient  reason  for  disregard- 
ing the  adjustment  which  was  made  by  the  parties  themselves  of 
that  transaction.  We  are  of  the  opinion  also,  that  as  Elizabeth 
Roberts  was  during  her  life  entitled  to  the  use  of  the  proceeds 
of  the  other  slaves,  her  transfer  to  the  appellee  operated  to  re- 
lieve him  from  responsibility  for  the  interest  accrued  during  her 
life  which  he  may  have  received  on  the  original  fund  of  $1,225. 

But  for  the  error  indicated  the  judgment  as  to  the  appellant 
is  reversed,  and  the  cause  remanded  for  a  judgment  in  confor- 
mity to  the  principles  of  this  opinion. 

(a)  Kane  v.  Bloodgood,  1  Johnson's  Ch.  90:  The  statute  of  limitations  is  a 
good  plea  in  equity,  as  well  as  at  law.  Those  trusts  which  are  mere  creatures 
of  a  court  of  equity,  and  not  within  the  cognizance  of  a  court  of  law,  are  not 
within  the  statute  of  limitations.  As  long  as  there  is  a  continuing  and  subsist- 
ing trust,  acknowledged  or  acted  upon  by  the  parties,  the  statute  does  not  apply; 
but  if  the  trustee  denies  the  right  of  his  cestui  que  trust,  and  the  possession  of  the 
party  becomes  adverse,  lapse  of  time,  from  that  period,  may  constitute  a  bar  in 
equity;  but  other  trusts,  which  are  the  ground  of  an  action  at  law,  are  not  ex- 
empted from  the  operation  of  the  statute.  Where  the  plaintiff  is  entitled  to 
dividends  on  shares  in  an  incorporated  company,  and  for  which  he  has  a  clear 
remedy  at  law,  it  is  not  such  an  express  and  direct  trust  as  will  take  the  case 
out  of  the  statute. 


250— ££jX  HEMPHILL  v.  LEWIS, 


HEMPHILL,  et  al,  v.  LEWIS. 

{Decided  at  the  Summer  term,  1 870,  of  the  Court  of  Appeals  of  Ken- 
tucky, Chief  Justice  GEORGE  ROBERTSON  delivering  the  opinion  of  the 
Court.  Reported  in  7  Bush,  214.] 

APPEAL  FROM  JESSAMINE  CIRCUIT  COURT. 

When  the  law  intrusts  the  estate  of  an  infant  to  the  care  and  protection  of  a 
guardian,  the  fiduciary  undertakes  to  be  vigilant,  faithful,  and  competent. 
These  elements  of  qualification  imply  as  much  knowledge  of  law  as  may  be 
necessary  for  safety;  this,  however  procured,  he  assumes  to  possess  and 
properly  exercise. 

A  second  guardian  sued  the  former  guardian  of  his  ward  to  recover  estate  of  his 
ward  in  his  hands,  and  being  erroneously  advised  that  such  demand  was  a 
preferred  claim  against  such  former  guardian's  estate,  he  did  not  sue  the 
surety  of  the  former  guardian.  The  debt  was  lost  because  the  suit  was  not 
prosecuted  in  due  time  against  the  surety.  The  second  guardian  is  held 
responsible  for  the  loss. 

Fiduciary  demands  have  priority  only  against  the  estates  of  dead  persons. 

In  a  proceeding  against  heirs,  a  personal  judgment  against  the  husband  of  an 
heir  is  wrong  when  the  record  does  not  show  why  the  husband  should  be 
held  responsible. 

F.  K.  Hunt  and  Seek  &  Mcssick,  for  appellants.  J.  S. 
Bronaugh,  for  appellee. 

CHIEF  JUSTICE  ROBERTSON  delivered  the  opinion  of  the 
Court :  Richard  H.  Ferguson,  who  was  indebted  as  guardian  to 
his  ward,  Joseph  C.  Lewis,  nearly  fifteen  hundred  dollars,  in 
1858,  made  an  assignment  of  his  whole  estate  in  trust  to  pay  all 
his  debts,  without  discrimination  as  to  character. 

At  the  instance  of  James  H.  Lowry,  his  substituted  surety, 
Ferguson  was  removed  as  guardian,  and  Andrew  Hemphill  was 
chosen  by  the  ward  as  his  guardian.  Hemphill  lost  no  time  in 
initiating  proceedings  for  the  collection  of  his  ward's  claim  out 
of  the  trust  estate.  But,  relying  with  apparent  confidence  on  his 
ability  thus  to  make  the  debt  out  of  the  principal  debtor,  he  did 
not  then  sue  Lowry  as  his  surety,  but  made  himself  a  party  to 
a  suit  then  pending  for  selling  the  trust  property,  and  sought 
payment  out  of  the  proceeds,  considering  his  ward's  claim  a 
preferred  debt,  which  on  that  hypothesis  was  perfectly  secure. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  251 

The  Circuit  Court  lulled  him  in  this  delusion  by  requiring  the 
master  to  report  preferred  debts,  and  by  the  report  of  this  as 
such  debt,  and  that  the  proceeds  of  sale  greatly  exceeded  the 
amount  of  it.  But  as  it  was  not  a  demand  against  a  dead  man, 
and  moreover  as  the  claim  was  asserted  in  the  suit  for  distrib- 
uting Ferguson's  estate  according  to  the  trust  among  all  the 
creditors  pro  rata,  the  court,  in  afterward  decreeing  distribution, 
adjudged  rightly  that  HemphilPs  ward  was  entitled  to  no  pref- 
erence ;  and  the  fund  being  insufficient  to  pay  all  Ferguson's 
creditors,  his  distributive  share,  as  allotted  and  paid,  left  a  large 
balance  unpaid.  When  this  'was  ascertained,  in  1860-61,  the 
balance  could  have  been  undoubtedly  made  out  of  Lowry,  who 
owned  a  very  large  estate ;  but  judgment  obtained  against  him 
before  the  March  term,  1862,  unexpectedly  exhausted  it,  so  as 
to  leave  no  property  to  levy  on  under  a  judgment  obtained 
against  him  by  the  ward  in  an  action  brought  to  the  March 
term,  1862. 

Hemphill  having  died,  this  suit  was  brought  by  the  appellant 
to  recover  from  his  executors  and  heirs  the  unsatisfied  balance ; 
and  on  the  pleadings  and  proofs  the  Circuit  Court  rendered  a 
personal  judgment  against  the  defendants,  including  the  hus- 
bands of  two  of  the  female  heirs.  That  is  the  judgment  we  are 
now  to  revise. 

We  are  not  allowed  to  doubt  that  Hemphill  acted  throughout 
in  good  faith  as  a  fiduciary.  We  have  reason  to  believe  that, 
in  pursuing  the  course  he  did,  he  followed  the  erroneous  counsel 
of  his  professional  adviser;  and  that,  confiding  in  that  advice, 
and  feeling  sure  that  in  that  way  he  would  certainly  make  the 
debt  without  troubling  the  surety,  he  did  what  he  considered 
best  for  all  parties.  We  are  also  satisfied  that,  had  he  sued  the 
surety  at  or  before  the  Fall  term,  1861,  he  would  have  made 
the  debt;  and  we  will  not  doubt  that  he  would  have  done  this 
had  he  been  sooner  undeceived  as  to  the  fatal  assurance  of  full 
success  in  the  chancery  suit;  for,  although  early  in  1861,  while 
he  and  other  vigilant  creditors  had  confidence  in  Lowry's  ability 
to  pay  all  his  debts,  yet  he  was  known  to  be  deeply  involved, 
and  his  ultimate  solvency  was  gravely  questioned  by  many 
persons,  as  the  multitude  of  suits  against  him,  and  other  facts, 
prove. 


-252  HEMPHILL  v.  LEWIS. 


Now,  harsh  as  such  a  decision  might  seem  to  be  against  an 
honest  and  careful  fiduciary,  we  are  compelled  to  decide  that 
beneficiaries,  especially  infants,  should  not  suffer  by  the  mistakes 
of  their  curators  in  law  or  in  fact. 

The  judgment  as  to  amount  is  therefore  sustained  by  policy 
and  inexorable  justice. 

In  such  a  casd  the  law,  when  it  intrusts  the  estate  of  an  in- 
competent infant  to  the  care  and  protection  of  a  guardian,  the 
fiduciary  undertakes  to  be  vigilant,  faithful,  and  competent ;  and 
these  elements  of  qualification  imply  as  much  knowledge  of  law 
as  may  be  necessary  for  safety.'  This,  however  procured,  he 
assumes  to  possess  and  properly  exercise.  And  in  this  case, 
therefore,  it  is  more  reasonable  and  just  that  the  guardian,  who 
was  deceived  as  to  the  best  remedy,  should  lose  what  a  correct 
knowledge  of  the  only  apt  procedure  might  have  saved,  than  the 
passive  and  confiding  infant  should  suffer  (a). 

But  the  judgment  is  wrong  in  form.  The  record  does  not 
show  why  the  husbands  should  be  held  responsible.  And  as  to 
the  heirs,  some  amendment  or  further  proceeding  is  necessary 
to  sustain  a  personal  judgment  against  them. 

Wherefore  the  jugment,  though  right  in  principle,  is  never- 
theless erroneous  in  detail,  and  is  therefore  reversed,  and  the 
cause  remanded  for  further  proceedings.  • 

(a)  See  the  case  following,  Miller  v.  Chaplin,  taken  from  20  Ohio  State,  442, 
wherein  the  wholesome  rule  of  equity  is  greatly  relaxed,  if  not  entirely  disre- 
garded by  (he  majority  of  the  court.  Indeed,  the  dissenting  opinion  of  Judge 
M'lLVAiNE  will  hereafter  stand  as  the  law  of  that  case,  unless  the  present  tend- 
ency to  looseness  eventually  overrides  all  the  safer  and  conservative  principles 
of  law  and  equity  in  regard  to  trusts.  The  healthy  tone  that  prevails  in  the 
opinion  of  the  veteran  Kentucky  justice,  is  wanting  in  that  of  Judge  WELCH,  in 
the  Ohio  decision.  And  if  the  rule  is  to  be  relaxed  in  favor  of  ignorance  of  the 
law,  it  would  appear  somewhat  strange  that  the  beginning  should  be  in  favor 
of  those  upon  whom  the  rule  should  be  the  most  stringent — those  who  are  acting 
for  others. 

As  heretofore  stated,  this  Ohio  decision  is  not  produced  here  as  an  authority, 
but  the  better  to  illustrate  the  true  rule,  by  bringing  it  into  contact  with  the 
correct  principles  of  equity  embraced  in  the  Kentucky  decision. 


MILLER  v.  CHAPLIN.  253— 


SARAH   MILLER,  et  at,  v.  EXECUTORS  OF  JOHN   CHAPLIN, 

deceased. 

{Decided  at  the  December  term,  1870,  of  the  Supreme  Court  of  Ohio, 
Jttdge  JOHN  WELCH  delivering  the  opinion.  Reported  in  20  Ohio  St.  442.] 

1.  Where  trustees  act  within  the  scope  of  their  authority,  and  exercise  such 

prudence,  care,  and  diligence  as  men  of  prudence,  care,  and  diligence  man- 
ifest in  like  matters  of  their  own,  they  should  not  be  held  accountable  for 
losses  happening  from  their  management  of  the  trust  funds. 

2.  Where  executors  are  directed  by  will  to  put  money  at  interest  for  a  specified 

length  of  time,  by  deposit  in  bank  or  loan  upon  mortgage,  they  have  a  dis- 
cretion to  loan  it  for  less  periods  than  the  whole  time  named,  and  to  reloan 
it  from  time  to  time,  and  change  the  mortgage  securities,  as  they  may  deem 
best  for  the  parties  interested. 

3.  In  such  case,  if  the  executors  are  at  fault  in  taking  insufficient  security  for 

the  loan,  but  subsequently  procure  the  borrower  to  substitute  therefor  other 
security  deemed  by  them  sufficient,  and  such  as  they  would  have  been  justi- 
fied in  taking  upon  the  original  loan,  they  will  not  be  held  accountable  for  a 
loss  happening  through  unforeseen  defects  in  the  latter  security,  merely  be- 
cause of  their  default  in  taking  the  former. 

4.  A  mortgage  executed  by  an  individual  member  of  a  firm,  upon  land  the  legal 

title  to  which  is  vested  in  him,  but  which  is  in  fact  owned  and  used  by  the 
firm  as  partnership  property,  is  "real  estate"  security,  within  the  meaning 
of  a  clause  in  the  will  directing  such  security  to  be  taken  for  money 
loaned. 

6.  The  maxim  that  every  person  is  presumed  to  know  the  law,  is  not  always 
applicable  to  trustees;  on  the  contrary,  they  may  be  exonerated  from  losses 
resulting  from  their  ignorance  of  the  law,  in  cases  where  they  exercise 
proper  diligence  and  precaution,  and  act  upon  the  advice  of  counsel. 

ERROR  to  the  Court  of  Common  Pleas  of  Lawrence  County. 
Reserved  in  the  District  Court.  The  case  is  stated  in  the 
opinion  of  the  Court. 

W.  W.  Johnson,  Simeon  Nash,  and  John  L.  George,  for 
plaintiffs  in  error.  0.  F.  Moore  and  E.  V.  Dean,  for  defendants 
in  error. 

WELCH,  J. :  The  defendants,  who  were  executors  of  the  last 
will  and  testament  of  John  Chaplin,  deceased,  and  also  testa- 
mentary guardians  of  the  minor  legatees,  were  directed  by  the 
will  to  put  at  interest  certain  moneys  of  the  estate,  either  by 
deposit  in  a  bank,  or  by  loan,  "well  secured  by  mortgage  on 


254  MILLER  t>.   CHAPLIN, 

real  estate,"  until  the  youngest  legatee  should  become  of  age, 
covering  a  period  of  sonie  fourteen  years. 

The  money  came  to  the  hands  of  the  executors  in  three  sev- 
eral parcels,  and  was  loaned  by  them  to  one  Rogers,  upon  three 
several  mortgages  on  real  estate.  These  mortgages  were  suffi- 
cient security  for  the  money,  except  that  in  one  of  them  there 
was  a  mistake  in  the  description  of  the  mortgaged  property, 
which  mistake,  however,  could  and  would  readily  have  been 
corrected  had  it  been  discovered.  Each  of  these  loans  ran  for 
one  year  only.  After  the  maturity  of  one  of  the  loans,  and 
while  the  other  two  still  remained  undue,  at  the  request  of 
Rogers,  and  to  accommodate  him,  the  executors  released  these 
mortgages  and  canceled  the  mortgage  notes,  taking  from  Rogers 
a  new  note  for  the  entire  sum,  which  he  secured  by  a  mortgage 
on  other  real  estate,  called  in  the  proceeding  the  "  Hepler  mort- 
gage." The  property  covered  by  this  latter  mortgage  was  in- 
sufficient in  value  to  secure  the  amount  loaned,  and  was,  more- 
over, subject  to  a  prior  mortgage,  a  fact  which  the  executors 
failed  to  ascertain,  having  omitted  to  examine  the  records  for 
that  purpose.  Upon  discovery  of  the  insufficiency  of  the  Hepler 
mortgage,  the  executors  made  an  arrangement  with  Rogers, 
by  which  they  released  the  same,  and  again  took  a  new  mort- 
gage. This  last  mortgage  was  upon  Rogers's  undivided  half 
of  a  certain  mill-lot,  with  a  mill  erected  thereon,  which  was  at 
the  time  owned  and  used  by  Rogers  and  his  brother  as  partners 
in  the  milling  business,  but  the  title  to  which  stood  upon  the 
record  as  that  of  tenants  in  common.  The  property  thus  mort- 
gaged was  sufficient  in  value  to  secure  the  loan ;  and  Rogers 
himself,  as  well  as  the  firm  of  Rogers  and  Brother,  was  solvent 
and  good  for  the  debt.  In  taking  the  mill  mortgage,  the  exec- 
utors, who  were  not  learned  in  the  law,  exercised  their  best 
judgment,  and  acted  in  good  faith,  under  the  advice  of  counsel. 
Their  counsel  was  a  lawyer  in  good  standing  in  his  profession. 
He  testifies  that  he  had  long  resided  in  the  town  where  the  mill 
is  situate,  and  was  acquainted  with  property  there,  and  with  the 
Rogerses,  and  that  he  advised  the  executors  that  the  security 
was  good.  He  also  testifies  that  the  executors  were  "very  cau- 
tious, and  took  a  great  deal  of  pains  to  get  the  very  best  secu- 
rity." It  is  true,  that  he  says  his  opinion  was  not  asked  as  to 


IN  THE  SUPREME  COURT  OF  OHIO.  255 

the  liability  of  the  property  for  debts  of  the  partnership.  He 
probably  knew  the  fact  that  it  was  partnership  property.  If  he 
did  not,  the  executors  probably  did  not,  for  they  were  non-res- 
idents of  the  town.  The  truth  seems  to  be,  that  the  rule  of 
equity  which  subjects  such  property  to  the  payment  of  partner- 
ship liabilities,  was  utterly  unknown  to  the  executors,  and  if 
known  to  their  attorney,  did  not  occur  to  him  at  the  time. 

Subsequently,  the  firm  of  Rogers  and  Brother  proving  to  be 
insolvent,  an  action  was  brought  by  the  executors  to  foreclose 
the  mortgage.  To  this  action  the  creditors  of  the  firm  of  Rogers 
and  Brother  were  made  parties,  and  the  mill  property  was  by 
decree  of  court  subjected  to  the  payment  of  pai'tnership  debts, 
for  which  it  proved  insufficient,  and  Rogers  being  insolvent,  the 
mortgage  debt  was  lost. 

After  bringing  their  action  upon  the  mortgage,  the  executors 
were  offered,  in  security  of  the  loan,  the  note  of  a  third  person, 
which  was  in  fact  secured  by  mortgage  (the  executors,  however, 
not  being  informed  that  it  was  so  secured),  on  condition  that 
they  would  release  the  mortgage  upon  the  mill  property.  Under 
the  advice  of  their  said  attorney,  they  refused  this  offer.  Had 
they  accepted  it,  the  debt  would  have  been  saved.  They  re- 
fused the  offer  in  good  faith,  and  in  the  belief  that  the  mill 
mortgage  was  good,  or  at  least  was  better  than  the  security  so 
offered. 

In  their  account  filed  in  the  Probate  Court  for  final  settle- 
ment, the  executors  credited  themselves  with  the  amount  of  this 
loss,  being,  with  the  interest,  some  $6,000.  To  this  item  in  the 
account  the  legatees,  the  present  plaintiffs  in  error,  excepted. 
The  exception  was  overruled  by  the  Probate  Court,  and  the 
cause  appealed  to  the  Common  Pleas,  where  a  like  judgment 
was  entered.  To  reverse  the  judgment  of  the  Common  Pleas, 
a  petition  in  error  was  prosecuted  by  the  legatees  in  the  District 
Court,  and  the  cause  was  there  reserved  for  decision  here. 

The  case  presents  the  single  question,  whether  the  executors 
have  been  guilty  of  a  breach  of  trust.  In  other  words,  have 
they  acted  within  the  scope  of  their  authority,  and  exercised 
such  prudence,  care,  and  diligence  in  the  management  of  this 
fund,  as  men  of  ordinary  diligence,  care,  and  prudence  mani- 
fest in  like  matters  of  their  own?  If  they  have  not,  then  the 


256  MILLER  v.  CHAPLIN, 

loss  should  fall  upon  them ;  otherwise  it  should  be  borne,  as 
losses  generally  are,  by  the  owners  of  the  fund. 

It  is  claimed,  in  the  first  place,  that  the  executors  rendered 
themselves  absolutely  liable  to  account  for  the  fund,  by  their  re- 
lease of  the  first  three  mortgages,  which  were  amply  sufficient 
security,  and  also  by  taking  the  Hepler  mortgage  without  as- 
certaining the  true  value  of  the  property,  or  the  existence  of  a 
prior  mortgage  upon  the  property ;  an$  that,  however  fully  and 
well  they  may  have  discharged  their  duty  in  taking  the  final 
mortgage  upon  the  mill  property,  this  will  not  discharge  them 
from  their  liability. 

The  answer  to  this  claim,  it  seems  to  us,  is,  that  the  will 
prescribes  no  limits  as  to  the  length  of  time  for  which  any  loan 
should  run,  but  intrusts  to  the  executors  a  discretion  to  loan  it 
for  longer  or  shorter  periods,  and  to  collect  and  reloan  it,  as 
they  might  deem  proper.  They  had  a  right  at  any  time,  either 
before  or  after  the  money  became  due,  to  receive  payment  of  it 
from  Rogers,  and  reloan  it  to  him  upon  new  securities,  or,  which 
would  seem  to  be  in  effect  the  same  thing,  to  substitute  new  se- 
curities for  the  old  ones.  The  final  loan  upon  the  mill  mortgage 
must,  therefore,  be  looked  upon  in  the  light  of  an  original  loan. 
Had  the  executors  made  no  loan  of  the  money  at  all,  but  kept 
it  in  their  own  hands,  down  to  the  date  of  the  mill  mortgage, 
surely  the  loan  upon  that  mortgage,  if  well  and  judiciously 
made,  would  have  discharged  them  from  all  loss  happening 
therefrom  without  their  fault ;  and  yet  in  that  case  their  prior 
breach  of  trust,  in  failing  to  loan  the  money  at  all,  would  have 
been  at  least  as  great,  and  as  undeniable,  as  in  the  present  case. 

But  it  is  said,  even  if  the  mill  mortgage  is  to  be  considered 
as  an  original  transaction,  that  the  executors  were  guilty  of  a 
breach  of  trust  in  taking  it,  first,  because  the  mill  property  was 
not  "  real  estate,"  and,  therefore,  not  within  the  scope  of  their 
authority ;  and,  secondly,  being  partnership  property,  and  as 
such  liable  primarily  to  the  satisfaction  of  partnership  debts, 
the  security  was  insufficient,  and  such  as  no  prudent  man  would 
accept! 

We  are  clear  in  the  opinion  that  the  first  of  these  positions 
is  not  well  taken.  Real  property,  the  title  to  which  is  vested  in 
the  members  of  a  firm,  but  which  is  in  fact  owned  and  used  by 


IN  THE  SUPREME  COURT  OF  OHIO,  257 

the  firm  as  partnership  property,  though  regarded  in  equity  as 
part  of  the  assets  of  the  concern,  and  as  such  subject  to  some 
of  the  incidents  of  personal  property,  is  nevertheless  in  law  real 
estate,  and  can  only  be  mortgaged  or  conveyed  as  such.  A 
mortgage  upon  such  property  is  not  a  mortgage  upon  personal 
property,  but  upon  real  estate. 

The  second  position  assumed  involves  more  of  difficulty.  If 
the  executors,  at  the  time  of  taking  the  mortgage  upon  the  mill 
property,  were  aware  that  it  was  in  fact  owned  and  used  by  the 
firm  as  partnership  property,  and  were  also  aware  of  the  law 
which  holds  it  liable,  like  other  partnership  assets,  to  the  pay- 
ment of  partnership  debts,  to  the  exclusion  of  the  individual 
debts  of  the  members  of  the  firm,  they  were  clearly  guilty  of  a 
breach  of  trust  in  taking  the  mortgage.  That  they  were  aware 
of  the  fact  that  the  mill  property  was  owned  and  used  as  part- 
nership property,  they  are  estopped  to  deny.  This  is  so,  because 
otherwise  they  would  have  been  innocent  purchasers  without 
notice,  and  no  decree  could  have  been  properly  rendered  against 
them,  and  in  favor  of  the  partnership  creditors,  in  their  action 
to  foreclose  the  mortgage.  That  decree  estops  them,  not  only 
from  denying  its  truth,  but  also  from  denying  any  fact  upon 
which  it  necessarily  rests.  We  are  bound  to  assume,  therefore, 
that  the  executors  acted  with  a  knowledge  that  this  was  part- 
nership property.  It  is  manifest,  however,  that  they  acted  in 
utter  ignorance  of  the  law — or,  rather,  the  rule  of  equity — by 
which  such  property  is  subjected,  as  personal  assets,  to  the  pay- 
ment of  partnership  debts,  to  the  exclusion  of  liens  created 
thereon  by  the  individual  members  of  the  firm.  It  is  admitted 
that  they  acted  in  good  faith,  and  exercised  their  best  judgment. 
They .  followed  the  advice  of  their  counsel,  a  lawyer  of  large 
practice  and  long  experience,  and  who  stood  high  in  his  profes- 
sion. WouM  it  be  just,  under  such  circumstances,  to  hold  them 
accountable  for  their  ignorance  of  this  recondite  and,  I  might 
even  say,  doubtful  principle  of  law — a  principle  which,  though 
established  as  law  in  Ohio,  is  said  to  be  denied  in  some  other 
States?  It  never  occurred  to  their  counsel  to  suggest  the  ex- 
istence of  any  such  rule  of  law.  How  could  we  expect  it  would 
occur  to  the  executors,  who  were  unlearned  in  the  law?  The  evi- 
dence shows  that  the  executors  consulted  many  business  persons, 

17 


258  MILLER  r.  CHAPLIN, 

as  to  the  propriety  and  safety  of  taking  the  proposed  security, 
yet  no  one  suggested  any  difficulty  or  objection  on  the  ground 
that  the  mill  was  partnership  property.  In  all  probability,  had 
the  testator  himself,  or  the  legatees  themselves,  been  consulted, 
under  the  same  circumstances  they  would  have  fallen  into  the 
same  mistake.  Is  it  just,  then,  to  hold  the  executors  responsible 
for  this  loss?  Are  they  guilty  of  a  breach  of  trust,  a  betrayal 
of  the  confidence  reposed  in  them  by  the  testator!  A  majority 
of  the  Court  think  not.  It  seems  to  us,  that  in  taking  this  last 
mortgage,  the  executors  acted  up  to  the  standard  observed  by 
men  of  ordinary  prudence  and  sagacity. 

As  to  the  refusal  of  the  executors  to  release  the  mill  mort- 
gage, and  take  in  lieu  thereof  the  promissory  note  of  a  third 
person,  secured  by  mortgage,  it  is  enough  to  say  that  they  were 
not  informed  of  the  fact  that  it  was  so  secured,  and  that  in  re- 
fusing to  accede  to  the  offer  they  followed  the  advice  of  their 
counsel. 

A  majority  of  the  Court  are  unable  to  see  any  error  in  the 
judgment  of  the  Court  of  Common  Pleas.  JUDGMENT  AFFIRMED. 

SCOTT,  C.  J.,  and  DAT,  J.,  concurred. 

WHITE,  J.,  being  of  opinion  that,  on  the  facts  of  the  case, 
the  judgment  ought  to  be  reversed,  dissented. 

M'ILVADTE,  J.,  dissenting:  For  the  third  proposition  in  the 
foregoing  syllabus  1  would  like  to  substitute  the  following : 

3.  In  such  case,  if  a  loan  is  made  for  a  less  time  than  the  whole  period,  and 
the  same  is  "  well  secured  by  mortgage  upon  real  estate,"  as  directed  by  the  will, 
the  executors  have  no  authority,  before  maturity,  to  change  such  securities  for 
the  mere  accommodation  of  the  borrower,  and  without  any  intent  or  purpose  to 
benefit  the  trust  estate ;  and  if  such  change  is  made,  without  the  assent  of  the 
beneficiaries,  the  executors  assume  the  risk  of  any  loss  resulting  therefrom. 

And  in  my  opinion  the  fifth  proposition  of  the  syllabus  ought 
to  be  modified  so  as  to  read  as  follows : 

5.  The  maxim  that  every  man  is  presumed  to  know  the  law,  applies  to 
trustees;  but  they  may  be  exonerated  from  losses  resulting  from  their  ignorance 
of  the  law,  in  cases  where  they  exercise  proper  diligence  and  precaution,  and  act 
upon  the  advice  of  counsel,  provided  the  counsel  is  fully  informed  as  to  the  facts 
material  to  the  question  or  subject-matter  upon  which  his  legal  opinion  is  taken. 

The  facts  deducible  from  the  testimony  set  out  in  the  record 
of  this  case,  are  stated  (with  the  exceptions  hereinafter  men- 


IN  THE  SUPREME  COURT  OF  OHIO.  259 

tioned)  in  the  opinion  of  the  Court.  These  facts;  in  my  judg- 
ment, show,  at  least,  two  distinct  violations  of  duty  on  the  part 
of  the  defendants,  either  of  which  renders  them  personally  liable 
to  the  plaintiffs  to  account  for  the  lost  fund,  namely : 

1.  The  exchanging  of  the  mortgages  first  taken — which  were 
undoubted  securities  for  the  loans  made — for  the  "  Hepler  mort- 
gage," solely  for  the  accommodation  of  the  borrower,  and  without 
the  assent  of  the  beneficiaries. 

2.  The  cancellation  of  the  Hepler  mortgage,  and  acceptance 
of  the  "mill    mortgage"  as   the   sole   security  for  the   money 
loaned. 

I  admit  that  trustees,  in  all  cases,  may,  and  should,  change 
securities  when  the  interest  of  the  trust  estate  requires  it,  or 
where  it  is  reasonably  believed  that  the  change  will  be  beneficial 
to  the  estate.  But  I  deny  that  trustees,  in  any  case  (without  the 
assent  of  the  beneficiaries),  may  change  securities  for  the  mere 
accommodation  of  the  debtor,  and  without  any  intent  or  purpose 
to  benefit  the  estate.  All  unnecessary  intermeddling  with  good 
securities  ought  and  does  impose  the  risk  upon  the  intermeddler. 
That  such  is  the  rule,  where  the  securities  (other  than  personal 
securities)  come  into  the  hands  of  the  trustees  directly  from  the 
founder  of  the  trust,  is  not  doubted.  And  that  this  rule  applies 
in  such  cases,  even  though  the  declaration  of  trust  contains  ex- 
press authority  to  change  securities,  has  been  frequently  held. 
See  Tiffany  and  Bullard  on  Trusts,  etc.,  615,  and  cases  cited. 

If  express  authority,  in  such  cases,  to  change  securities  can 
not  be  exercised  unless  the  interest  of  the  trust  fund  requires  it, 
I  can  see  no  reason  why  good  securities  taken  by  trustees  upon 
their  own  investment  should  be  the  subject  of  a  less  prudent 
rule.  "Let  well  enough  alone,"  is  a  maxim  of  common  pru- 
dence, Tiffany  and  Bullard,  615,  and  cases  cited. 

In  surrendering  those  good  securities  first  taken,  for  the 
mere  accommodation  of  Rogers,  the  defendants  assumed  the 
risk ;  and  inasmuch  as  the  fund  has  been  lost,  a  liability  has 
been  incurred  bv  them  to  account  to  the  plaintiffs  for  the  lost 
fund ;  and  this  liability  has  not  been,  and  could  not  have  been, 
wiped  out  by  any  subsequent  but  ineffectual  effort  on  their  part 
to  secure  the  loan  in  accordance  with  the  directions  of  the  will 
of  Chaplin. 


260  MILLER  v.  CHAPLIN, 

What  I  claim  is  this :  Where  a  liability  has  been  incurred 
by  trustees  by  reason  of  their  fault  in  giving  up  good  securities 
for  insufficient  ones,  that  liability  becomes  a  security  in  the 
hands  of  the  beneficiaries,  to  which  they  have  a  right  to  look  in 
the  event  of  a  loss.  And  all  subsequent  efforts  on  the  part  of 
the  trustees  to  obtain  "better  or  additional  security,"  is  to  be 
regarded  as  efforts  made  for  their  own  indemnity. 

I  admit  that  if  the  loan  had  afterward  been  called  in,  the  lia- 
bility would  have  ceased,  for  the  reason  that  no  loss  resulted 
from  the  default ;  but  such  is  not  this  case,  as  I  understand  it. 
The  loan  to  Rogers  never  was  called  in ;  no  new  investment  was 
made,  or  pretended  to  be  made.  The  first  change  of  securities 
was  made  solely  for  the  accommodation  of  Rogers,  because  he 
wanted  "  his  own  property  to  be  clear,"  and  the  second  was 
made  for  the  sole  purpose  of  "getting  better  security"  for  the 
old  note. 

Again,  in  their  subsequent  efforts  to  obtain  "  better  security  " 
the  defendants  did  not  stand  in  the  same  relation  to  the  fund  as 
in  the  first  instance.  They  had  no  choice  as  between  borrow- 
ers— that  important  opportunity  for  the  exercise  of  discretion 
was  lost — the  fund  was  out.  All  they  could  do  at  that  time, 
was  to  take  such  "  better  security  "  as  they  could  get.  And  al- 
though the  better  security  offered  to  them  might  have  appeared 
good  enough,  yet  who  can  say  it  would  have  been  accepted  if 
the  money  had  been  in  their  possession? 

It  is  impossible  for  me  to  sec  how  trustees,  who  have  vio- 
lated their  duty  in  making  or  managing  an  investment,  whereby 
the  foundation  of  a  liability  has  become  fixed,  can  afterward, 
and  touching  the  same  investment,  be  regarded,  in  equity,  with 
as  much  favor  as  though  every  duty  had  been  faithfully  per- 
formed. 

As  to  the  question  whether  this  investment  was  lost  by 
reason  of  the  first  change  in  the  securities,  I  have  but  two  re- 
marks to  make:  1.  The  investment  was  not  at  any  subsequent 
time  "well  secured"  by  mortgage  on  real  estate;  and,  2.  If  the 
defendants  had  not  canceled  these  first  mortgages  for  the  mere 
accommodation  of  a  "dashing  business  man,"  these  plaintiffs 
would  not  have  lost  their  patrimony. 

If,  however,  the  defendants  can  not  be  held  to  account  by 


IN  THE  SUPREME  COURT  OF  OHIO.  261 

reason  of  their  first  default,  because  of  the  subsequent  transac- 
tion in  obtaining  the  mill  mortgage,  I  still  hold  that  there  was 
no  such  care  and  diligence  in  that  transaction  as  common  pru- 
dence requires.  If  that  transaction  had  been  a  reinvestment  of 
the  fund,  it  ought  not  to  have  been  made.  A  man  of  ordinary 
prudence,  knowing  the  law  (and  he  is  presumed  to  know  it), 
would  not  have  accepted  a  mortgage  on  a  moiety  of  property 
held  in  common,  which  at  the  time  was  in  the  use  of  a  copart- 
nership composed  of  the  tenants  in  common,  without  first  inquir- 
ing as  to  the  conditions  upon  which  the  title  was  held  by 
members  of  the  firm,  and  as  to  the  indebtedness  of  the  firm. 
Had  such  inquiry  been  made,  the  defendants  would  have  come 
to  the  knowledge  that  the  common  estate  was  partnership  prop- 
erty, and  that  the  debts  of  the  firm  were  largely  in  excess  of  all 
its  assets,  and  that  the  mortgage  by  a  copartner  in  an  insolvent 
firm,  upon  firm  property,  for  his  individual  debt,  was  utterly 
worthless  as  a  security. 

It  is  no  answer  to  this  charge  of  negligence  to  say,  that  the 
defendants  had  the  fullest  confidence  in  the  pecuniary  responsi- 
bility of  the  borrower,  and  that  his  reputation  in  that  regard 
was  uas  good  as  any  man  in  the  county."  They  were  not  au- 
thorized to  look  to  the  pecuniary  responsibility  of  Rogers ;  the 
will  of  Chaplin  directed  that  the  loan  should  be  "well  secured 
by  mortgage  on  real  estate." 

Nor  will  it  do  to  say  that  this  last  security  was  accepted 
under  the  advice  of  counsel,  until,  at  least,  it  is  shown  that  all 
the  material  facts  of  the  case  were  made  known  to  counsel, 
which  was  not  so  in  this  case,  unless  it  be  inferred  from  the 
testimony  tending  to  show  that  the  counsel  who  gave  the  advice 
lived  in  the  neighborhood,  knew  the  property,  and  was  well  ac- 
quainted with  the  parties.  But  I  think  such  inference  can  not 
be  fairly  drawn  from  such  circumstances,  in  the  face  of  the  tes- 
timony of  Colonel  Nigh  (the  counsel  referred  to,  and  the  only 
testimony  upon  this  point),  who  testified  as  follows:  "All  the 
legal  advice  I  gave  them  [the  executors]  was,  that  the  title  was 
in  the  name  of  H.  C.  &  R.  E.  Rogers,  jointly ;  and  that  there 
were  no  liens  so  far  as  we  could  learn  from  the  records."  And 
on  cross-examination  Colonel  Nigh  said :  "I  was  not  called  on  by 
Proctor  and  Anderson,  in  taking  the  mill  mortgage,  to  ascertain 


->262  —         *  DRURY  v.  CROSS, 


how  much  Henry  C.  Rogers,  or  the  firm  of  H.  C.  Rogers  & 
Co.,  was  in  debt.  They  did  not  inquire  about  whether  the  part- 
nership debts  of  H.  C.  Rogers  &  Co.  would  come  in  ahead  of 
their  mortgage.  They  did  not  ask  my  opinion  on  that." 

In  either  view  of  this  case,  the  defendants  ought  to  be  held 
to  account. 


DRURY  v.  CROSS. 

[Decided  at  the  December  term,  1868,  of  the  Supreme  Court  of  the 
United  States,  Associate  Justice  DAVID  DAVIS  delivering  the  opinion. 
Reported  in  7  Wallace,  299.] 

A  sale,  far  below  value,  of  a  railroad,  with  its  franchises,  "Tolling  stock,  etc., 
under  a  decree  of  foreclosure,  set  aside  as  fraudulent  against  creditors;  the 
sale  having  been  made  under  a  scheme  between  the  directors  of  the  road 
and  the  purchasers,  by  which  the  directors  escaped  liability  on  indorsements 
which  they  had  made  for  the  railroad  company.  And  the  purchasers  held 
to  be  trustees  to  the  creditors  complainant,  for  the  full  value  of  the  property 
purchased,  less  a  sum  which  the  purchasers  had  actually  paid  for  a  large 
lien  claim,  presented  as  for  its  apparent  amount,  but  which  they  had  bought 
at  a  large  discount.  Interest  on  the  balance,  from  the  day  of  purchase  to 
the  day  of  final  decree  in  the  suit,  to  be  added. 

But  because  the  full  value  of  the  property  sold  was  not  shown  with  sufficient 
certainty,  the  case  was  sent  back  for  ascertainment  of  it  by  a  master. 

APPEAL  from  the  Circuit  Court  for  Wisconsin. 

The  case  was  this :  Bailey  &  Co.,  of  Liverpool,  England, 
held  notes  against  the  Milwaukee  and  Superior  Railroad  Com- 
pany, indorsed  by  four  of  its  directors,  for  about  $21,000  (the 
price  of  iron  furnished  to  lay  the  road),  and  as  collateral  secu- 
rity for  payment,  $42,000  in  mortgage  bonds  of  the  road.  Two 
hundred  and  eighty  thousand  dollars  in  similar  bonds,  but  which 
had  never  been  issued,  were  sealed  up  and  deposited  with  M.  K. 
Jesup  &  Co.,^wo£  to  be  issued  until  the  debt  to  Bailey  &  Co.  was 
paid,  and  twenty-seven  miles  of  the  road  were  built.  The  com- 
pany was  managed  by  a  board  of  seven  directors,  of  whom  four 
made  a  quorum. 

The  company  having  made  about  five  miles  of  the  road,  be- 
came thoroughly  insolvent,  and  abandoned  their  enterprise. 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  263 

Bailey  &  Co.,  being  unpaid,  and  not  being  willing  to  trust  to 
and  proceed  on  their  mortgage,  brought  actions  against  the  four 
directors  on  their  indorsement.  These,  desirous  to  throw  the 
debt  on  the  company,  where  it  belonged,  procured,  at  their  own 
expense  and  risk,  a  suit  to  be  commenced  to  foreclose  the  mort- 
gage, so  that  they  could  make  their  debt  out  of  the  collaterals 
in  their  hands.  In  this  suit  certain  bonds  issued  to  the  city  of 
Milwaukee,  and  the  $42,000  of  bonds  held  by  Bailey  &  Co., 
were  spoken  of;  but  no  mention  was  made  of  the  $280,000  of 
bonds  deposited  with  Jesup  &  Co.,  and  no  relief  asked  in  rela- 
tion to  them.  On  the  19th  of  March,  1859,  the  bill  was  taken 
as  confessed,  decree  rendered,  and  the  case  referred  to  the 
master  to  compute  and  report  the  amount  that  was  due. 

Prior  to  the  decree,  in  consequence  of  negotiations  between 
the  directors  and  Cross,  Luddington  and  Scott  (Cross  &  Co.),  an 
arrangement  was  made  by  which  these  persons  were  to  purchase 
the  claim  of  Bailey,  and  protect  the  directors  from  their  indorse- 
ment. The  directors,  on  their  part,  were  to  aid  Cross  &  Co.  to 
acquire  the  entire  property  of  the  road. 

In  furtherance  of  this  plan,  the  $280,000  of  bonds  in  the 
hands  of  Jesup  &  Co.  were  delivered,  by  resolution  of  the  Board 
of  Directors,  to  Bailey  &  Co.,  as  additional  security  for  their 
claim.  Bailey  &  Co.  did  not  ask  for  further  security,  and  re- 
fused, at  first,  to  receive  these  bonds,  and,  in  fact,  did  not  receive 
them  until  they  had  sold  their  claim,  with  their  collaterals,  to 
Cross  &  Co.  This  was  after  the  decree  in  the  foreclosure  suit. 
Cross  &  Co.,  having  thus  got  possession  of  $322,000  in  bonds, 
transferred  by  Bailey  &  Co.,  as  collaterals,  in  order,  as  they 
said,  to  become  the  absolute  owners  of  them,  sold  them,  with 
consent  of  the  railroad  corporation,  at  the  Exchange  in  Mil- 
waukee, on  five  days'  notice ;  bought  them  for  a  small  sum  of 
money ;  produced  them  before  the  master,  who  allowed  them  as 
a  lien  on  the  road,  and  the  final  decree  in  the  foreclosure  suit 
was  rendered  upon  the  said  $322,000  bonds,  and  no  others. 

The  sum  paid  by  Cross  &  Co.  to  Bailey  &  Co.,  for  all  the 
judgments  obtained,  was  $13,380.20. 

Under  the  decree  of  foreclosure,  the  entire  railroad,  its  fran- 
chises, rolling  stock  (two  locomotives  and  tenders,  with  ten  plat- 
form cars),  and  fixtures,  were  sold,  in  August,  1859,  to  Cross  & 


264  DRURY  v.  CROSS, 


Co.,  for  $20,100.  The  iron  tracks,  which  were  now  torn  up, 
same  evidence  showed,  had  been  sold  for  $22,500.  The  loco- 
motives (little  used)  had  cost  $18,000;  the  cars,  about  $5,000. 
The  company,  it  was  said,  had  paid  between  $lb,000  and  $20,- 
000  for  their  right  of  way.  There  were  also  railroad  chairs, 
spikes,  ties,  some  fences,  etc. ;  the  value  not  being  exactly 
shown. 

In  this  state  of  things,  Drury  &  Page  having  obtained  judg- 
ment for  $21,634  against  the  railroad  company  for  locomotives 
sold  to  it,  filed  a  bill  in  chancery  in  the  court  below  against  the 
company,  Cross,  and  his  copurchasers,  alleging  that  the  sale 
was  fraudulent,  and  seeking  to  reach  the  franchises  and  property 
of  the  company,  sold  to  Cross  &  Co.  under  the  decree  of  fore- 
closure. The  court  below  dismissed  the  bill  as  to  Cross  and  his 
copurchasers;  and  from  this  decree  of  dismissal  the  present 
appeal  came. 

Mr.  M.  H.  Carpenter,  for  the  appellants.  Mr.  Palmer,  for 
the  appellee. 

Mr.  Justice  DAVIS  delivered  the  opinion  of  the  Court :  The 
transaction  which  this  case  discloses  can  not  be  sustained  by  a 
court  of  equity.  The  conduct  of  the  directors  of  this  railroad 
corporation  was  very  discreditable,  and  without  authority  of  law. 
It  was  their  duty  to  administer  the  important  matters  committed 
to  their  charge,  for  the  mutual  benefit  of  all  parties  interested, 
and  in  securing  an  advantage  to  themselves,  not  common  to  the 
other  creditors,  they  were  guilty  of  a  plain  breach  of  trust  (a). 
To  be  relieved  from  their  indorsement,  they  were  willing  to 
sacrifice  the  whole  property  of  the  road.  Bound  to  execute  the 
responsible  duties  intrusted  to  their  management,  with  absolute 
fidelity  to  both  creditors  and  stockholders,  they,  nevertheless, 
acted  with  reckless  disregard  of  the  rights  of  creditors  as  mer- 
itorious as  those  whose  paper  they  had  indorsed.  If  Bailey  & 
Co.  had  sold  iron  to  build  the  road,  so  had  the  Boston  association 
sold  locomotives  to  run  it.  It  is  not  easy  to  see  why  the  corpo- 

(a)  See  preceding  case  of  Goodin  v.  Whitewater  Canal  Company,  page  125, 
which  is  a  confirmation  of  (he  doctrines  above  enunciated.  The  case  of  Murrey 
v.  Vanderbilt,  preceding,  page  103,  is  to  the  contrary.  See,  also,  notes  on  pages 
110  and  111. 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  265 

ration  should  exhaust  its  effects  to  pay  one,  and  leave  the  other 
unpaid.  But,  it  is  said,  the  directors,  being  unable  to  pay  both, 
had  the  right  to  choose  between  theni.  We  do  not  deny  that  a 
debtor  has  a  legal  right  to  prefer  one  creditor  over  another, 
when  the  transaction  is  bona  fide  ;  but  this  is,  in  no  just  sense, 
a  case  of  preference  between  creditors.  If  the  law  permits  the 
debtor,  in  failing  circumstances,  to  make  choice  of  the  persons 
he  will  pay,  it  denies  him  the  right,  in  doing  it,  to  contrive  that 
the  unpreferred  creditor  shall  never  be  paid.  In  other  words, 
the  law  condemns  any  plan  in  the  disposition  of  the  property 
which  necessarily  accomplishes  a  fraudulent  result. 

That  the  plan  adopted  by  the  directors  of  the  railroad  to 
dispose  of  its  property  to  Cross  &  Co.  was  a  fraudulent  con- 
trivance, and  necessarily,  if  executed,  accomplished  a  fraudulent 
result,  is  too  plain  for  controversy.  At  the  time  this  scheme 
was  initiated,  there  were  only  five  miles  of  track  laid,  the  com- 
pany hopelessly  insolvent,  and  the  enterprise  abandoned.  In  this 
condition  of  things,  the  directors  were  sued  on  their  indorsement, 
and,  as  was  natural,  manifested  an  anxiety  to  have  the  property 
of  the  company  pay  the  debt  for  which  they  were  liable.  But 
Bailey  &  Co.  preferred  not  to  enforce  their  mortgage  lien,  and 
only  consented  to  allow  it  to  be  done,  on  being  indemnified 
against  the  risk  and  expense  of  the  suit.  The  directors,  in  fur- 
nishing them  this  indemnity,  in  order  to  procure  the  enforcement 
of  the  mortgage  lien  to  the  extent  of  $42,000,  which  in  their 
hands  was  a  just  debt  against  the  company,  were  guilty  of  no 
wrong.  But  the  departure  from  right  conduct,  on  their  part, 
commenced  at  this  point.  Notwithstanding  they  had  the  control 
of  the  foreclosure  suit,  they  were  not  content  to  let  it  proceed 
to  decree  and  sale  without  they  were,  in  advance,  relieved  of 
personal  responsibility.  Bailey  &  Co.  would  not  release  them, 
and  they  endeavored  to  find  some  person  who  would  purchase 
the  Bailey  claim,  with  its  collaterals,  and  discharge  them  from 
liability  on  their  notes.  This  would  have  been  well  enough,  if 
the  scheme  had  embraced  only  the  $42,000  bonds  held  as  col- 
laterals, which  the  company  justly  owed,  and  the  foreclosure  suit 
was  brought  to  enforce.  But  the  scheme  went  much  further; 
for  these  directors,  who  controlled  the  corporation,  in  their  selfish 
desire  to  save  themselves  at  the  expense  of  their  own  reputation 


266  DRURY  v.  CROSS, 


and  the  rights  of  creditors,  were  willing  to  use  the  means  at 
their  command  to  swell  the  indebtedness  of  the  road  beyond  its 
true  amount,  in  order  to  aid  more  effectually  Cross  and  his  asso- 
ciates to  acquire  all  the  property  of  the  company. 

If  Cross  &  Co.  had  been  satisfied  with  the  transfer  of  the 
$42,000  bonds,  which  constituted  the  true  indebtedness  against 
the  road,  in  the  hands  of  Bailey  &  Co.,  the  transaction  on  their 
part  would  have  been  free  from  censure ;  but  the  certain  attain- 
ment of  the  object  they  had  in  view  required  more  bonds.  It 
was  very  clear  that  bidders  might  appear,  if  the  road  was  to  be 
sold  for  no  more  than  the  face  of  these  bonds,  while  they  would 
be  deterred  from  attending  a  sale  where  the  sum  to  be  made  was 
over  $300,000.  To  bring  the  decree,  therefore,  up  to  a  point 
at  which  competition  would  be  silenced,  it  became  necessary  to 
use  the  bonds  in  the  hands  of  Jesup  &  Co.  Two  hundred  and 
eighty  thousand  dollars  in  the  bonds  of  an  insolvent  corpora- 
tion— constituting  no  indebtedness  against  it — are  thrust,  un- 
asked, into  the  hands  of  creditors,  for  the  ostensible  purpose 
of  furnishing  them  additional  security,  when,  at  the  time,  they 
were  negotiating  a  sale  of  the  debt  to  be  secured  for  $7,000  less 
than  its  face.  But  the  transfer  to  Bailey  &  Co.  was  a  mere 
pretense.  To  preserve  a  semblance  of  fairness  in  the  business, 
the  bonds  had  to  come  through  Bailey  &  Co.,  but  the  real  pur- 
pose was  not  to  help  them,  but  to  aid  Cross  and  his  associates 
to  absorb  the  whole  road — and  this  these  directors  were  willing 
to  do — when  the  debt  they  were  struggling  to  escape  could  be 
paid  for  $13,380.20,  and  the  very  iron  in  the  road-bed,  for  which 
the  debt  was  incurred,  was  worth  over  $20,000. 

It  is  claimed  that  the  sale  at  the  Milwaukee  Exchange,  as- 
sented to  by  the  corporation,  conferred  rights  on  the  purchasers 
of  the  bonds  which  can  not  be  successfully  attacked ;  but  this 
claim  is  based  on  the  idea  that  the  sale  was  for  an  honest  pur- 
pose, when,  in  fact,  it  was  only  part  of  a  previously  concerted 
plan  to  accomplish  a  fraudulent  purpose.  The  ceremony  of  this 
sale  was  a  cheap  way  of  showing  honesty  and  fairness,  for  it 
was  very  evident  that  an  advertisement  to  sell  a  large  amount 
of  the  bonds  (having  no  market  value)  of  an  insolvent  and 
abandoned  railroad  corporation  would  never  attract  the  attention 
of  capitalists. 


IN  THE  SUPREME  COURT  OF  THE  U. 


The  scheme  to  acquire  the  property  of  this  corporation  was, 
in  its  inception,  fraudulent,  and  every  step  in  the  progress  of  its 
execution  was  necessarily  stamped  with  the  same  character. 
There  is  nothing  in  this  record  to  mitigate  the  conduct  of  the 
defendants,  who  purchased  the  Milwaukee  and  Superior  Railroad. 
They  knew  the  road  was  abandoned,  the  company  insolvent,  the 
complainants  unpaid  for  property  then  in  the  possession  of  the 
corporation,  and  yet  they  combine  with  timid  and  unfaithful 
trustees  to  get  not  only  tins,  but  all  the  property  of  the  corpo- 
ration, and  adopted  a  plan  to  carry  out  their  project,  which  re- 
sulted in  raising  the  decree  to  an  extent  that  would  necessarily 
prevent  all  fair  competition.  The  fruits  of  such  an  adventure 
can  not  be  enjoyed  by  the  parties  concerned  in  it. 

There  are  other  features  in  this  case  which  provoke  com- 
ments, but  we  forbear  to  make  them. 

Cross,  Luddington,  and  Scott  purchased  the  entire  railroad, 
locomotives,  cars,  and  franchises  'of  the  company,  for  about 
$20,000.  Subsequent  to  the  sale,  they  stripped  the  road-bed  of 
iron,  ties,  spikes,  and  chairs,  which,  with  the  locomotives,  cars, 
and  fencing,  they  sold  to  various  parties,  and  realized  from  the 
sales  a  large  sum  of  money  ;  but  how  much,  the  evidence  is  so 
singularly  loose  that  we  are  unable  to  tell.  On  account  of  the 
want  of  certainty  on  this  point,  the  case  will  have  to  be  sent 
back,  and  referred  to  a  master  to  take  proofs,  who  will  also  as- 
certain and  report  the  value  (if  there  be  any)  of  the  franchises 
of  the  company  which  Cross  &  Co.  still  retain. 

Cross,  Luddington,  and  Scott  must  be  held  liable  as  trustees 
to  the  complainants  for  the  full  value  of  the  property  they  pur- 
chased on  the  sale  of  the  road,  after  deducting  the  amount  due 
at  the  day  of  sale  on  the  Bailey  judgments  against  the  directors, 
which  amount  they  will  be  allowed  to  retain. 

They  must  also  be  charged  with  interest  on  the  balance  found 
due  the  complainants,  from  the  day  of  the  sale  to  the  day  of  the 
final  decree  in  this  suit. 

The  DECEEE  of  the  Circuit  Court  is  REVERSED,  and  the  cause 
remanded,  with  directions  to  proceed  in  CONFORMITY  WITH  THIS 
OPINION. 


268-2. WASHINGTON  R-  R-  CO-  v-  ALEX.  R.  R.  CO.; 


WASHINGTON,  ALEXANDRIA  AND  GEORGETOWN  RAILROAD  Co. 
v.  ALEXANDRIA  AND  WASHINGTON  RAILROAD  Co.,  et  als. 

[Decided  at  the  January  term,  1870,  of  Virginia  Military  Court  of 
Appeals  (a),  HORACE  B.  BURNHAM,  O.  M.  DORMAN,  and  W.  WILLOUGHBY, 
Judges,  the  latter  delivering  the  opinion  of  the  Court.  Reported  in  19 
Gratton,  592.] 

A  corporation  being  a  defendant  to  a  suit  in  equity,  which  seeks  to  have  it 
declared  null,  the  holders  of  stock  in  it  are  not  proper  parties  to  defend 
the  suit. 

In  such  a  case,  the  holders  of  the  stock  claiming  that  if  the  corporation  is  an- 
nulled, they  have  equitable  interests  in  the  property,  may  be  admitted  as 
parties  defendants  to  protect  their  interests  (b). 

(a)  There  is  nothing  in  the  report  that  explains  the  judicial  status  of  this 
Court;  but  in  the  process  of  "reconstructing"  the  State,  it  was  found  necessary 
or  proper  at  one  time  to  commit  the  executive  duties  to  a  military  governor,  and 
these  judges  are  supposed  to  have  been  commissioned  during  this  interregnum. 
However  that  may  be,  the  decision  is  based  upon  abundant  authority;  and  there 
is  little  doubt  but  that  substantial  justice  was  done  in  the  premises. 

(6)  Bronson  v.  La  Crosse  and  Milwaukee  Railroad  Company,  2  Wallace,  283: 
Stockholders  of  a  corporation,  who  have  been  allowed  to  put  in  answers  in  the 
name  of  a  corporation,  can  not  be  regarded  ns  answering  for  the  corporation 
itself.  In  a  special  case,  however,  where  there  is  an  allegation  that  the  directors 
fraudulently  refused  to  attend  to  the  interests  of  the  corporation,  a  court  of 
equity  will,  in  its  discretion,  allow  a  stockholder  to  become  a  party  defendant, 
for  the  purpose  of  protecting — from  unfounded  and  illegal  claims  against  the 
company — his  own  interest,  and  the  interest  of  such  other  stockholders  as  choose 
to  join  him  in  the  defense. 

As  to  when  stockholders  can  sue  the  directors  or  agents  of  the  company,  see 
Coleman  v.  Eastern  Counties  Railway,  10  Beavan,  1. 

Marsh  v.  Eastern  Railroad  Company,  40  New  Hampshire,  567,  is  a  case  by 
stockholders  to  restrain  a  breach  of  trust  by  the  directory;  and  the  rule  by 
which  they  were  permitted  to  sue  is  stated  on  page  567:  "If  the  directors  of  a 
corporation  refuse  to  prosecute,  by  collusion  with  those  who  had  made  them- 
selves nnswerable  by  their  negligence  or  fraud,  or,  if  the  corporation  was  still 
under  the  control  of  those  who  must  be  made  defendants  in  the  suit,"  the  stockholders 
are  permitted  to  sue. 

It  is  now  no  longer  doubted,  either  in  England  or  the  United  States,  that 
courts  of  equity  in  both  have  a  jurisdiction  over  corporations,  at  the  instance  of 
one  or  more  of  their  members,  to  apply  preventive  remedies  in  injunction,  to  re- 
strain those  who  administer  them  from  doing  acts  which  would  amount  to  a  vio- 
lation of  charters,  or  to  prevent  any  misapplication  of  their  capital  or  profits 
which  might  result  in  lessening  the  dividends  of  stockholders  or  the  value  of 


VIRGINIA  MILITARY  COURT  OF  APPEALS.  269 

The  plaintiff  and  defendant  corporations  being  corporations  of  this  State,  the 
owners  of  the  stock,  though  non-residents,  are  not  entitled  to  have  the  cause 
removed  to  the  United  States  Court,  to  have  the  question  of  the  validity  of 
the  corporation  decided. 

The  Alexandria  and  Washington  Railroad  Company  make  a  deed  on  their  prop- 
erty to  secure  certain  bonds;  and  it  provides  that  if  the  trustee  becomes  in- 
capable of  acting,  any  court  of  record  of  Alexandria  County,  upon  the 
application  of  three-fifths  of  the  holders  of  the  bonds,  upon  notice  to'  the 
president  or  any  director  of  the  company,  may  appoint  another  trustee.  The 
trustee,  president^  and  directors  go  into  the  enemy's  lines,  and  remain  there 
during  the  war.  An  order  of  the  court  of  Alexandria  County,  substituting 
another  person  as  trustee,  without  notice,  is  null  and  void ;  and  a  sale  made 
by  such  substituted  trustee  is  utterly  null. 

A  trustee  in  a  deed  to  secure  debts,  who  is  the  attorney  in  fact  and  law  of  the 
creditor,  can  not  make  a  valid  sale  at  auction  of  the  property  to  himself. 

Where  there  are  various  incumbrances  on  property,  and  the  priorities  are  not 
ascertained,  a  sale  by  a  trustee  under  one  of  the  deeds  is  improper. 

Quere:  Whether  the  act,  Code,  ed.  of  1860,  ch.  61,  sees.  28,  29,  applies  to  a  snle 
by  a  trustee  of  a  mere  equity,  conveying  no  legal  title  to  the  property  of  the 
corporation? 

THE  following  statement  of  this  case  was  prepared  by  Judge 

WlLLOUGHBY : 

The  Alexandria  and  Washington  Railroad  Company  was 
chartered  in  February,  1854,  by  the  Legislature  of  Virginia, 
and  was  organized  pursuant  thereto ;  and  James  S.  French  was 
made  president.  In  August,  1854,  Congress  passed  an  act 
authorizing  said  company  to  purchase  ajid  hold  lands  in  the 
District  of  Columbia,  and  to  lay  a  track  through  such  streets  as 
the  corporate  authorities  of  Washington  might  approve.  In 
1855,  the  authorities  of  Washington  authorized  the  company  to 
lay  its  track  on  Maryland  Avenue,  from  the  Long  Bridge  to  the 
Baltimore  Depot,  and  guaranteed  their  bonds  of  $60,000  to 
assist  the  company  in  the  construction  of  the  road;  for  which, 
in  April,  1855,  the  company  executed  a  deed  of  trust  to  Joseph 
H.  and  A.  T.  Bradley,  for  the  benefit  of  the  corporation,  on  all 
the  property  of  the  company. 

The  track  was  laid   from   Alexandria  to  the  Long  Bridge, 

their  shares,  as  either  may  be  protected  by  the  franchises  of  a  corporation — if 
the  acts  intended  to  be  done  create  what  in  law  is  denominated  a  breach  of  trust. 
And  the  jurisdiction  extends  to  inquire  into  and  to  enjoin,  as  the  case  may  re- 
quire that  to  be  done,  any  proceedings  by  individuals  in  whatever  character  they 
may  profess  to  act,  if  the  subject  of  complaint  is  an  implied  violation  of  a  cor- 
porate franchise,  or  the  denial  of  a  right  growing  out  of  it,  for  which  there  n 
not  an  adequate  remedy  at  law,  Ib.  citing  Dodge  v.  Wolscy,  18  Howard,  341. 


270  WASHINGTON  R.  R.  CO.  ».  ALEX.  R.  R.  CO.; 

and  on  Maryland  Avenue,  and  cars  and  engines  were  obtained, 
and  the  road  operated  until  the  Spring  of  1861,  up  to  the  time 
of  the  breaking  out  of  the  war. 

On  the  31st  of  December,  1856,  a  second  deed  of  trust  was 
made  upon  the  property  of  the  company,  to  J.  Louis  Kinzer, 
trustee,  to  secure  Fowle,  Snowden  &  Company  $14,849.50,  on 
which  was  paid  $8,348.14. 

On  the  16th  of  July,  1857,  a  third  deed  of  trust  was 
executed  to  Walter  Lenox,  trustee,  to  secure  the  payment  of 
$30,000  in  coupon  bonds,  which  the  company  had  been  author- 
ized to  issue  by  an  act  of  the  Legislature.  These  bonds  were 
payable  July  22,  1877,  with  interest  semi-annually  at  seven  per 
cent ;  and  it  was  provided,  that  in  default  of  payment  of  prin- 
cipal or  interest,  the  road  might  be  sold  by  giving  at  least  sixty 
days'  notice  by  publication  in  certain  newspapers.  The  deed 
further  provides  as  follows : 

And  it  is  mutually  agreed,  that  in  case  of  the  death,  inca- 
pacity, or  resignation  of  the  party  of  the  second  part  (the 
trustee,  Lenox),  or  of  his  successors  in  this  trust,  then  the  office 
of  trustee  filled  by  him  shall  become  vacant,  and  such  vacancy 
shall  be  filled  by  an  appointment  to  be  made  by  any  court  of 
record  in  the  county  of  Alexandria,  on  the  application  of  the 
parties  of  the  first  part,  or  of  the  holders  of  three-fifths  of  said 
bonds.  Provided,  however,  in  the  last  case,  notice  of  the  appli- 
cation of  the  parties  making  such  request  be  given  to  the  pres- 
ident or  one  of  the  directors  of  said  company ;  and  all  the 
rights,  powers,  and  authority  hereby  conferred  on  the  original 
trustee  shall  then  and  there  devolve  upon  and  be  invested  in 
his  successor  or  successors  so  appointed.  This  deed  of  trust  in 
terms  recognizes  the  first  deed  of  trust  of  $60,000  as  an  existing 
and  prior  lien. 

These  bond's  were  sold  to  Benjamin  Thornton,  of  England, 
for  $10,000,  upon  which  was  paid  $2,000  in  cash ;  and  notes 
were  given  for  the  balance ;  upon  which  was  afterward  paid 
about  $3,500,  making  about  $5,500  paid  in  allj  the  balance  still 
being  due. 

This  company  was  authorized  by  its  charter  to  issue  stock  to 
the  amount  of  $300,000,  and  issued  stock  only  to  the  amount 
of  $200,000.  There  were  various  judgments  and  claims  against 


VIRGINIA  MILITARY  COURT  OF  APPEALS.  271 

the  company,  making  the  amount  of  the  indebtedness,  together 
with  the  sums  secured  by  said  deeds  of  trust,  including  interest 
on  the  10th  of  April,  1862,  as  reported  by  the  commissioner, 
about  $195,000.  Of  these  judgments,  Alexander  Hay  claimed 
to  be  the  owner  of  about  $40,000  in  April,  1861;  but  it  seems 
that  on  August  24,  1860,  he  had  assigned  these  judgments, 
which  had  been  obtained  by  him  long  before,  to  James  S. 
French,  upon  the  payment  to  him  of  $5,000,  though  it  does  not 
appear  that  this  $5,000  has  been  paid.  By  power  of  attorney 
executed  at  the  same  time,  he  authorized  said  French  to  deal 
with  such  judgments  in  the  same  manner  as  if  the  same  were  his 
individual  property. 

On  the  occupation  of  the  city  of  Alexandria  by  the  United 
States  troops,  in  May,  1861,  the  rolling  stock  of  the  company 
was  transferred  to  the  Orange  and  Alexandria  Railroad,  and 
taken  beyond  the  Federal  lines.  The  president,  directors,  and 
the  trustee,  Lenox,  all  went  South  at  that  time,  and  remained 
within  the  Confederate  lines  during  the  war;  and  the  rolling 
stock  was  sold  by  said  French  to  parties  within  said  lines. 

The  United  States  Government  took  possession  of  the  road 
in  1861,  and  laid  the  track  with  heavy  rails,  and  put  it  in  good 
order,  and  used  it  till  the  close  of  the  war,  having  exclusive 
possession  thereof  during  that  period,  and  leaving  the  road  in 
good  order  and  very  valuable. 

It  is  claimed  by  Hay  that  he  took  possession  of  the  road 
early  in  1861.  and  made  a  contract  with  the  Secretary  of  War, 
by  which  the  War  Department  was  to  repair  the  road;  and 
binding  himself  to  defray  the  expenses  of  such  repairs,  which 
should  not  be  discharged  by  the  use  of  the  road.  The  Govern- 
ment used  the  road  long  enough  to  pay  its  outlays  upon  the 
road,  if  the  use  thereof  could  be  chargeable  against  the  Gov- 
ernment. 

The  defendant,  Joseph  B.  Stewart,  an  attorney-at-law,  acted 
as  attorney  for  Alexander  Hay,  and  during  the  year  1861, 
either  as  such  attorney  or  on  his  own  account,  sold  the  iron  of 
the  company  for  something  over  $10,000,  and  received  the  pro- 
ceeds. No  account  has  ever  been  made  of  this  money  by  him, 
or  by  Mr.  Hay. 

On  the  28th  of  January,  1862,  Joseph  Davison,  who  claimed 


272  WASHINGTON  R.  R.  CO.  t> .  ALEX.  R.  R.  CO. ; 

to  be  the  agent  of  Benjamin  Thornton  for  the  coupon  bonds  said 
to  be  held  by  him,  made  an  agreement  with  said  Stewart,  au- 
thorizing him  as  attorney  to  take  such  steps  as  might  be  neces- 
sary to  close  out  and  perfect  the  interest  of  said  bondholders  in 
and  to  said  road,  and  agreeing  to  give  him  a  contingent  fee  of 
one-half  of  the  whole  amount  received  on  said  bonds  in  the  sale 
of  the  same,  or  of  the  said  road,  over  and  above  the  sum  of 
SI 0,000,  and  all  the  interest  that  the  said  bondholders,  or  any 
of  them,  may  have  paid,  or  may  have  to  pay  on  the  said  $30,000 
of  bonds,  at  the  rate  of  seven  per  cent  per  annum ;  and  on  the 
next  day,  January  29th,  said  Stewart,  as  attorney  in  fact  for 
said  Hay,  gave  to  said  Davison  an  agreement  in  writing,  that 
if  a  sale  be  made  under  said  deed  of  trust,  and  the  said  road  be 
purchased  by  himself  or  constituents,  the  said  Thornton  should 
have  the  right  to  continue  his  interest  in  the  same  according  to 
the  ratio  of  his  present  lien  upon  and  demand  against  the  same ; 
and  shall  enjoy  and  receive  a  pro  rata  rate  of  all  the  apprecia- 
tions of  value  or  profits  claimed  from  the  future  use  or  develop- 
ment of  the  same,  and  be  created  a  stockholder  accordingly. 

On  the  3d  of  February,  1862,  Davison  filed  a  petition  in  the 
County  Court  of  Alexandria  County,  sworn  to  by  him,  stating 
that  he  is  the  attorney  in  fact  of  all  the  bondholders  secured  by 
the  deed  of  trust  to  Walter  Lenox,  claiming  that  said  trustee 
has  become  incapacitated  from  performing  said  trust;  that  he 
has  made  diligent  search  for  the  president,  or  some  director  or 
agent  of  said  company,  to  whom  he  could  give  notice,  but  could 
find  none  upon  whom  notice  could  be  served,  and  believed  that 
they  had  abandoned  the  franchises  of  the  road,  and  gone  beyond 
the  jurisdiction  of  the  court,  and  asks  that  Joseph  B.  Stewart 
be  appointed  trustee. 

Joseph  Thornton  also  swears  that  he  knows  of  his  own 
knowledge  that  said  Davison  is  the  agent  of  said  bondholder, 
Benjamin  Thornton,  and  has  authority  to  make  the  applications. 

Upon  these  affidavits  and  application,  the  County  Court 
make  an  order  substituting  Stewart  as  trustee  in  said  deed  of 
trust,  in  place  of  Walter  Lenox,  on  the  3d  day  of  February, 
1862. 

On  the  4th  day  of  February,  1862,  Davison  requested  the 
trustee  to  make  sale  of  said  road,  and  thereupon,  on  the  10th 


VIRGINIA  MILITARY  COURT  OF  APPEALS.  273 

day  of  February,  1862,  such  sale  was  advertised  to  take  place 
on  the  1  Oth  day  of  April  following,  on  which  day  it  was  sold  at 
public  auction,  and  bid  off  by  Alexander  Hay  for  the  sum  of 
$12,500;  and  Hay  having  assigned  one-half  of  his  purchase  to 
Joseph  Thornton,  and  they  having  agreed  to  continue  as  a  cor- 
poration under  the  name  of  the  Washington,  Alexandria,  and 
Georgetown  Railroad  Company,  conveyance  was  made  to  them, 
and  to  such  company,  of  the  road,  and  all  the  franchises  and 
property  of  the  Alexandria  and  Washington  Company,  by  Stew- 
art as  trustee.  On  the  3d  of  May,  1862,  the  organization  of  the 
new  company  was  perfected  by  the  appointment  of  officers ;  the 
stock  having  been  divided  between  Hay,  Stewart,  Davison,  and 
Thornton,  the  same  then  being  owned  by  them.  On  the  3d  of 
March,  1863,  Congress  extended  the  charter  of  the  old  company, 
so  as  to  allow  it  to  occupy  its  present  location  on  Maryland  Av- 
enue, in  Washington,  and  to  construct  a  bridge  alongside  of  the 
Potomac  Bridge  upon  certain  conditions  named  in  the  act.  This 
charter  is  claimed  to  have  been  obtained  at  the  instance  of 
members  of  the  new  company,  but  it  does  not  appear,  -and  is 
not  explained  why,  in  terms,  it  was  granted  to  the  "  Alexandria 
and  Washington  Railroad  Company." 

By  an  act  of  the  Alexandria  Legislature,  of  January  23, 
1864,  the  Washington,  Alexandria,  and  Georgetown  Company, 
which  is  therein  declared  to  be  a  corporation,  lawfully  succeeding 
by  purchase  to  the  old  company,  is  authorized  to  issue  stock  to 
the  amount  of  $500,000,  to  sell  its  bonds  to  the  amount  of 
$200,000,  in  addition  to  the  $100,000  allowed  to  the  old  com- 
pany, and  to  borrow  money  upon  its  promissory  notes  to  the 
amount  of  $100,000  more.  With  the  proceeds  of  such  stock, 
bonds,  and  notes,  it  is  claimed  by  the  defendants  that  a  large 
portion  of  the  indebtedness  of  the  old  company  was  paid ; 
money  was  raised  to  procure  the  charter  from  Congress,  to  build 
the  bridge,  repair  and  put  the  road  in  good  order ;  and  such 
stock  is  now  held  by  various  parties  in  Washington,  New  York, 
and  Baltimore. 

The  bill,  which  was  filed  in  April,  1866,  by  James  S.  French 
as  president  of  the  Alexandria  and  Washington  Railroad  Com- 
pany against  the  new  company,  charges,  among  other  things, 
that  the  appointment  of  J.  B.  Stewart  as  trustee  was,  for  many 

18 


274  WASHINGTON  R.  R.  CO.  v.  ALEX.  R.  R.  CO; 

reasons  alleged  therein,  null  and  void ;  and  that  the  sale  by  him 
was  consequently  without  authority  ;  and  that  all  the  action  of 
himself,  Hay,  Thornton,  and  Davison,  was  the  result  of  a 
fraudulent  conspiracy  on  their  part  to  obtain  the  road  unlaw- 
fully ;  and  that  this,  together  with  the  conduct  of  said  Stewart 
in  making  such  sale,  ought  to  make  the  sale  void. 

The  answers  were  filed,  accounts  taken  by  the  commissioner 
and  filed,  and  various  other  proceedings  had,  up  to  the  22d 
of  November,  18G7,  when  Coleman,  Riddle,  and  others,  filed 
a  petition  representing  that  they  were  the  owners  of  a  large 
majority  of  the  stock  of  the  new  company,  and  as  such  were 
deeply  interested  in  the  contest  between  the  said  companies, 
and  asked  that  they  be  made  parties  defendants  ;  which  was 
allowed. 

On  the  23d  day  of  December,  18G7,  a  decree  was  made  ad- 
judging that  "  the  whole  proceeding  of  the  County  Court  of 
Alexandria  County,  at  its  February  term,  1802,  substituting 
Joseph  B.  Stewart  as  trustee  in  place  of  Walter  Lenox,  under 
the  deed  of  trust  of  the  16th  of  July,  1857,  was  without  author- 
ity of  law,  and  null  and  void ;  and  that  all  the  subsequent  pro- 
ceedings of  the  said  Stewart  under  said  deed,  his  sale  of  the 
said  road  and  its  franchises  to  Alexander  Hay,  and  the  incor- 
poration of  the  said  Washington,  Alexandria,  and  Georgetown 
Railroad  Company  growing  out  of  the  said  sale,  are  null  and 
void,  and  that  the  same  should  be  set  aside  and  annulled."  By 
the  same  decree  a  reference  was  made  to  the  commissioner  to 
inquire  into  the  interests  of  said  Coleman  and  others,  and  make 
further  report  to  the  court. 

On  the  2d  of  June,  18G6,  a  petition  was  filed  by  the  new 
company,  alleging  that  the  corporation  was  the  only  party  hav- 
ing any  real  interest  in  the  suit,  except  Joseph  B.  Stewart ;  that 
Hay  was  a  citizen  of  Pennsylvania,  and  Stewart  a  citizen  of 
Kentucky ;  and  on  the  same  day  a  petition  was  filed  by  said 
Stewart,  alleging  that  he  was  a  citizen  of  Kentucky;  that  the 
company  was  made  a  defendant  for  the  purpose  of  preventing  a 
removal  of  the  same  into  the  United  States  Court ;  and  upon 
said  petitions  motion  was  made  by  the  petitioners  to  remove  the 
cause  into  the  Circuit  Court  of  the  United  States.  This  motion 
was  overruled.  On  the  Gth  of  December,  1SGG,  this  motion  was 


VIRGINIA  MILITARY  COURT  OF  APPEALS.  275 

renewed  by  Stewart  and  Hay,  each  alleging  their  citizenship  of 
another  State ;  which  was  also  denied. 

In  May,  1868,  two  petitions  for  removal  to  the  United  States 
Court  were  filed  by  said  Coleman  and  others,  each  alleging  their 
citizenship  of  Maryland  and  other  States  ;  one  claiming  that  the 
validity  of  orders  made  by  the  Secretary  of  War  and  other 
military  officers  in  relation  to  said  road,  was  involved  in  the 
suit ;  and  the  others,  that  they,  holding  the  majority  of  the 
stock  of  the  new  company,  the  existence  of  which,  as  a  com- 
pany, was  denied  by  the  bill,  were  the  substantial  parties  de- 
fendants, and  alleging  that  from  prejudice  and  local  influence 
they  did  not  believe  they  would  be  able  to  obtain  justice  in  the 
State  courts.  They  also  filed  their  answers  at  the  same  term. 
The  motion  upon  these  petitions  was  denied  at  the  August  term 
of  1868,  and  then,  against  the  protest  of  Coleman  and  others, 
who  claimed  that  they  had  had  no  opportunity  to  take  tes- 
timony, a  decree  was  made  again  declaring  said  order  of  the 
County  Court  and  the  said  bill  null  and  void  ;  and  it  appearing 
that  large  liabilities  had  been  incurred  by  the  old  and  the  new 
companies,  that,  under  the  authority  to  issue  stocks  and  bonds 
to  a  limited  amount,  a  large  amount  had  been  issued  in  excess 
of  said  authority,  which  have  been  sold,  and  are  now  in  the 
hands  of  purchasers  thereof,  a  reference  was  ordered  to  ascer- 
tain what  equities  might  exist  growing  out  of  said  transactions. 
From  this  decree  an  appeal  has  been  taken  to  this  Court. 

E.  J.  Brent,  Jno.  L.  Brent,  and  Dulaney,  for  the  appellants. 
(jr.  W.  Brent,  Bradley  &  Gilmer,  for  the  appellees. 

WILLOUGHBY,  J. :  The  two  leading  questions  presented  for 
our  decision  are : 

First.  Ought  the  case,  under  the  circumstances  thereof,  to 
have  been  removed  on  the  petitions,  or  either  of  them,  for  such 
removal  to  the  United  States  Circuit  Court  ? 

Second.  Was  the  sale  made  by  the  trustee,  Joseph  B.  Stew- 
art, valid;  and  did  it  operate  to  extinguish  the  Alexandria  and 
Washington  Railroad  Company,  and  divest  it  of  its  corporate 
rights  and  privileges  ? 

It  would  seem  to  me,  without  refei'ence  to  the  validity  or  in- 
validity of  such  sale,  and  without  now  passing  upon  the  question 


276  WASHINGTON  R.  R.  CO.  v.  ALEX.  R.  R.  CO; 

of  its  right  to  be  regarded  as  a  corporation,  consistent  with 
legal  principles  to  regard,  for  the  purposes  of  the  decision  of 
the  points  before  us,  the  Washington,  Alexandria,  and  George- 
town Railroad  Company  as  a  company  capable  of  being  sued, 
and  of  exercising  certain  powers.  This  company  certainly  in- 
sists on  being  so  regarded ;  it  has  acted  as  such  with  a  full 
board  of  offibers  and  directors ;  and  as  such,  has  issued  stock, 
bonds,  and  notes  to  a  very  large  amount ;  it  has  been  so  recog- 
nized by  the  public ;  and  transactions  of  great  extent  have 
taken  place  upon  the  faith  of  the  existence  of  such  company ; 
and  it  was  recognized  as  such  by  the  act  of  Assembly  of  Jan- 
uary 23,  1864,  by  which  large  powers  and  privileges  were 
granted  to  it  as  "  a  lawfully  existing  company." 

The  question  regarding  the  petitions  for  removal  seems  to 
nie  to  require  our  first  consideration.  *. 

[That  part  of  the  opinion  of  Judge  WILLOUGHBY  (and  it  is  not  mere  courtesy 
to  call  it  an  able  exposition  of  the  law  bearing  on  the  question  of  jurisdiction) 
is  omitted,  as  not  bearing  immediately  upon  the  subject  of  Trusts.  The  profes- 
sion will  find  in  it  evidence  of  a  careful  examination  of  what  is  becoming  a 
very  complicated  question, — the  relative  jurisdiction  of  the  State  and  National 
judiciary.] 

The  conclusion  we  have  come  to  necessarily  brings  us  to  the 
consideration  of  the  next  question,  the  validity  of  the  sale. 

The  deed  of  trust,  upon  which  the  sale  was  founded,  contains 
this  provision:  "And  it  is  mutually  agreed,  that  in  case  of  the 
death,  incapacity,  or  resignation  of  the  party  of  the  second  part, 
or  of  his  successors  in  this  trust,  then  the  office  of  trustee  filled 
by  him  shall  become  vacant,  and  such  vacancy  shall  be  filled  by 
an  appointment  to  be  made  by  any  court  of  record  in  the  county 
of  Alexandria,  on  the  application  of  the  parties  of  the  first  part, 
or  of  the  holders  of  three-fifths  of  said  bonds :  Provided,  how- 
ever, in  the  last  case,  notice  of  the  application  of  the  parties 
making  such  request  be  given  to  the  president  or  one  of  the 
directors  of  said  company ;  and  all  the  rights;  power,  and  au- 
thority hereby  conferred  on  the  original  trustee,  shall  then  and 
there  devolve  upon  and  be  invested  in  his  successor  or  successors 
so  appointed."  It  also  provides  that  in  case  at  any  time  six 
months'  interest  becomes  due  and  unpaid,  the  trustee  "shall, 
upon  the  request  in  writing  of  the  holders  of  at  least  three-fifths 
interest  of  said  bonds,"  cause  the  property  to  be  sold  at  public 


VIRGINIA  MILITARY  COURT  OF  APPEALS  277 

auction,  a,fter  giving  at  least  sixty  days'  notice  of  the  sale  by 
publication  in  certain  newspapers  therein  named,  and  shall 
have  authority  thereupon  to  convey  the  said  property  to  the 
purchaser. 

This  is  a  contract,  the  authority  to  make  which  is  not  dis- 
puted ;  and  upon  this  depends  the  authority  of  proceedings  in 
relation  to  the  sale,  but  of  course  is  to  be  construed  with  refer- 
ence to  the  laws  of  the  State  then  in  force.  The  manner  of 
serving  this  notice  must  then  be  supposed  to  be  according  to 
the  law  relating  to  such  service.  This  notice  is  agreed  to  be 
the  process  upon  which  the  jurisdiction  of  a  court  of  record  to 
appoint  a  trustee  depends. 

But  we  are  met  at  the  threshold  of  this  inquiry  into  the  va- 
lidity of  the  order  of  the  court,  by  the  proposition,  that  as  the 
court  was  one  of  general  jurisdiction,  its  judgment  can  not  be 
assailed  only  upon  the  ground  of  want  of  jurisdiction,  arid  the 
presumption  is,  that  all  the  steps  necessary  to  give  it  jurisdic- 
tion were  taken  by  the  court.  It  should  be  borne  in  mind  that 
this  is  not  a  proceeding  in  which  this  judgment  is  collaterally 
assailed,  but  is  a  bill  in  equity,  filed  for  the  specific  purpose 
of  setting  aside  this  judgment  and  attacking  it  directly.  The 
bill  sets  out  facts  for  the  very  purpose  of  showing  that  the  court 
did  not  have  jurisdiction.  Although  the  distinctions  made  in 
different  cases  as  to  when  the  record  of  a  court  may  or  may  not 
be  contradicted,  are  very  subtle  and  somewhat  difficult  to  rec- 
oncile, I  do  not  think  any  case  can  be  found  in  which  it  is  held 
that  such  record  may  not  be  assailed  in  a  direct  proceeding  for 
that  purpose  in  equity,  by  showing  fraud,  or  especially  by  show- 
ing that  the  court  did  not  in  fact  have  jurisdiction. 

However  this  may  be,  I  am  sure  that  the  defendant  may  be 
allowed  to  show  that  he  had  no  notice,  and  that  there  was  no 
process  bringing  him  into  court,  by  filing  a  bill  in  equity  for 
this  specific  purpose,  and  by  actually  showing  such  want  of  ju- 
risdiction. Any  other  construction  of  law  would  be  the  most 
apparent  injustice,  for  there  could  be  no  other  remedy.  An 
appeal  would  not  correct  it,  for  on  an  appeal  the  party  would 
be  bound  by  the  record  as  it  is.  A  judgment  of  a  court  be- 
yond its  jurisdiction  is  plainly  void ;  and  to  render  a  judgment 
in  personam,  it  must  have  jurisdiction  of  the  person.  If  it  be 


278  WASHINGTON  R.  R.  CO.  v.  ALEX.  R.  R.  CO; 

a  judgment  in  rem,  it  must  have  jurisdiction  of  the  tiling.'  Every 
lawyer  knows,  for  example,  that  a  judgment  in  a  case  of  attach- 
ment, if  there  is  not  also  a  service  upon  the  person,  is  only  a 
judgment  against  the  property.  Such  a  judgment  does  not  au- 
thorize a  levy  of  an  execution  upon  other  property,  nor  is  it  even 
evidence  of  a  judgment  against  the  person.  This  is  not  a  pro- 
ceeding in  rent.  In  such  cases  courts  acquire  jurisdiction  only 
by  seizure  of  the  thing,  and  even  then,  in  most,  if  not  all,  cases, 
notice  is  given  in  some  way  to  parties  interested,  by  publication 
or  otherwise,  and  especially  if  it  is  agreed  that  jurisdiction  shall 
attach  only  by  giving  a  notice.  See  Pendbscot  Railroad  Com- 
pany v.  Weeks,  52  Maine,  456 ;  Hotting  swortli  v.  Harbour,  4 
Pet.  U.  S.  466;  Harris  v.  Hardeman,  14  How.  U.  S.  334; 
Webster  v.  Reid,  1 1  How.  U.  S.  437. 

In  Harris  v,  Hardeman,  the  court  says :  "  In  all  judgments 
by  default,  whatever  may  affect  their  competency  or  regularity, 
every  proceeding,  indeed,  from  the  writ  and  indorsements  thereon 
down  to  the  judgment  itself,  inclusive,  is  part  of  the  record, 
and  open  to  examination." 

Applying  this  principle  to  the  present  case,  on  the  examina- 
tion of  the  affidavit  of  Joseph  Davison,  we  find  that  the  record 
itself  shows  that  there  was  no  notice.  This  would  make  it  void 
upon  its  face.  I  can  see  no  escape  from  this  conclusion,  and  I 
do  not  see  how  it  can  be  seriously  questioned.  In  the  case  of 
Vorhees  v.  The  Bank  of  the  United  States,  10  Pet.  U.  S.  449,  the 
court  say  :  "  There  is  no  principle  of  the  law  better  settled  than 
that  every  proceeding  of  a  court  of  competent  jurisdiction  shall 
be  presumed  to  have  been  rightly  done  till  the  contrary  appears" 
This  is  a  case  strongly  relied  on  by  the  appellants,  and  is  per- 
haps one  of  the  strongest  cases  on  record  upholding  the  validity 
of  judgments  of  a  court.  But  this  was  a  case  in  ejectment,  and 
a  judgment  of  a  court  showing  a  sale  by  attachment  was  put  in 
as  defense ;  and  in  such  a  case  the  court  say,  though  the  record 
does  not  show  the  proper  steps  to  have  been  taken,  or  even  that 
the  steps  necessary  to  give  jurisdiction  were  taken,  it  must  be 
presumed  that  they  were  taken,  and  the  facts  could  not  be  con- 
troverted in  this  collateral  manner. 

The  cases  of  Harvey  v.  Tyler,  2  Wall.  U.  S*  328  ;  Florentine 
v.  Barton,  2  Wall.  U.  S.  210;  and  Comstock  v.  Crawford,  3 


VIRGINIA  MILITARY  COURT  OF  APPEALS.  279 

Wall.  U.  S.  304, — so  strongly  relied  upon  by  the  appellants, 
were  all  actions  of  ejectment,  and  the  records  were  all  sought 
to  be  set  aside,  by  showing  facts  cdiunde ;  and  the  court  held 
that  this  could  not  be  done.  The  case  of  Devauglm  v.  De- 
vaitf/hn,  decided  by  us  at  the  present  term,  was  a  decision  upon 
an  appeal  from  a  judgment  of  the  County  Court,  in  which  it 
was  claimed  that  the  record  did  not  show  affirmatively  that  it 
had  jurisdiction ;  and  we  held  only  that  it  was  to  be  presumed 
that  the  steps  necessary  to  give  jurisdiction  were  taken,  and 
that  the  presumption  must  be  that  the  court  had  evidence  suf- 
ficient to  justify  the  order  which  was  made.  But  it  is  easy  to 
see  the  difference  between  these  cases  and  the  one  under  con- 
sideration. Besides,  in  these  cases  the  records  did  not  disclose 
the  want  of  jurisdiction  on  their  face. 

But  it  is  urged  by  the  appellants  that  they  had  a  sufficient 
excuse  for  not  giving  a  notice,  from  the  fact  that  the  persons 
entitled  to  sucji  notice  had  all  left  the  country,  had  gone  beyond 
the  Federal  lines  into  the  lines  of  a  public  enemy;  that  they 
had  abandoned  the  property,  and  were  traitors  to  the  United 
States  Government,  and  engaged  in  war  upon  that  Government, 
and  that  it  was  impossible  to  give  them  notice  ;  and  the  law 
does  not  require  impossibilities.  This  presents  a  strong  appeal 
to  all  those  who  were  loyally  disposed  to  the  United  States, 
especially  when  presented,  as  it  is  in  the  answer,  in  the  fiercest 
language  and  in  the  most  glowing  terms.  Still,  we  must  not  be 
misled  by  such  an  appeal,  and  must  subject  it  to  the  test  of 
legal  principles.  These  facts  were  certainly  not  shown  to  the 
County  Court.  Nothing  of  them  appears  in  the  affidavits  upon 
which  the  order  was  founded.  If  they  could  be  regarded  as  an 
excuse  for  not  bringing  the  person  within  the  jurisdiction  of  the 
court,  such  excuse  was  certainly  not  made  the  basis  of  such  ju- 
risdiction, and  it  seems  to  me  rather  late  to  offer  such  excuse 
before  another  court  to^  bolster  up  a  jurisdiction  which  otherwise 
would  fail.  But  suppose  all  this  were  true,  and  then  shown  to 
the  court,  it  can  not  really  be  seriously  contended  that  if  the 
parties  were  the  greatest  criminals  on  earth,  if  they  had  left 
their  property  without  any  one  to  attend  to  it,  that  therefore 
they  can  be  deprived  of  their  rights  or  their  property,  except 
by  the  law  of  the  land,  or,  in  the  language  of  the  Constitution, 


280  WASHINGTON  R.  R.  CO.  ».  ALEX.  R.  R.  CO ; 

u  by  clue  process  of  law."  Certainly  this  does  not  give  to  indi- 
vidual citizens  the  right  to  deprive  them  of  such  rights  or  prop- 
erty. Nor  can  I  see  how  it  matters  whether  such  property  were 
valuable  or  nearly  worthless,  or  whether  it  had  been  properly  or 
improperly  managed. 

But  was  it  a  sufficient  excuse  for  not  serving  a  notice,  that 
the  persons  entitled  to  such  notice  could  not  be  found!  When 
a  condition  precedent  becomes  impossible  of  performance,  a 
person  may  be  excused  from  performing  it ;  but  it  does  not 
therefore  always  follow  that  because  it  is  impossible,  the  right  or 
privilege  depending  upon  such  condition  precedent  can  be  main- 
tained, not  even  if  this  is  made  so  by  the  acts  of  the  other  party 
entitled  to  such  condition  precedent. 

Where  a  court  has  no  jurisdiction  of  a  person,  it  does  not 
follow  that  because  a  party  has  done  all  that^he  could  do  to 
bring  such  person  within  such  jurisdiction,  and  has  failed,  that 
therefore  the  court  can  proceed  without  obtaining  jurisdiction. 
I  can  not  say,  however,  that  in  this  case  this  impossibility  was 
caused  by  the  act  of  the  party  entirely.  He  went  South,  it  is 
true,  voluntarily,  but  he  went  expecting  to  return  soon ;  but  he 
could  not  return.  This  was  a  misfortune  for  him;  and  it  was 
also  a  misfortune,  perhaps,  for  those  whose  rights  were  affected 
by  his  not  being  able  to  return.  But  it  was  a  misfortune  which 
resulted,  for  the  most  part,  at  least,  from  the  war  in  which  the 
Nation  was  unfortunately  engaged,  and  by  reason  of  which  thou- 
sands of  others,  in  common  with  the  parties  to  this  cause,  una- 
voidably suffered,  and  for  which  courts  and  the  usual  legal 
proceedings  could  not  afford  an  adequate  remedy. 

But  it  does  not  seem  to  me  that  the  parties  asking  for  the 
appointment  of  a  trustee  did,  in  fact,  all  that  they  might  have 
done.  The  president  of  the  old  company  still  had  a  residence 
in  Alexandria. 

The  deposition  of  E.  S.  Boynton,  a  witness  for  defendant, 
shows  that  he  had  a  residence  with  his  family  until  April,  1861, 
and  he  himself  resided  there  until  May,  leaving  his  house  and 
furniture  in  charge  of  said  Boynton,  and  declaring  that  he  ex- 
pected to  return  in  sixty  or  ninety  days.  We  can  readily  infer, 
from  the  facts  of  history  within  judicial  cognizance,  why  he 
could  not  have  returned  if  he  had  wished.  I  can  not  discover, 


VIRGINIA  MILITARY  COURT  OF  APPEALS.  281 

from  the  records,  how  there  is  any  proper  evidence  of  his  having 
engaged  in  arms  against  the  Government,  for  the  answer  stating 
such  fact  could  not  have  been  given  upon  any  knowjedge  by  the 
affiant,  and  this  is  not  to  be  presumed ;  nor  is  there  any  sufficient 
evidence  showing  that  he  did  not,  at  all  times,  intend  to  return 
to  his  place  of  residence.  In  fact,  the  affidavit  of  Davison,  upon 
which  the  order  of  the  court  was  made,  does  not  state  that  he 
had  no  residence  in  Alexandria,  and  is  defective  on  that 
ground.  This,  at  least,  should  be  shown  positively  in  any 
aspect  of  the  case. 

I  can  not  see  what  excuse  can  be  rendered  for  not  serving 
the  notice,  by  leaving  a  copy  at  his  residence,  as  the  statute 
prescribes.  Besides  all  this,  the  deed  of  trust  itself  shows  that 
Lenox,  who  was  an  officer  and  director  of  the  company,  and  the 
trustee  in  the  deed  of  trust,  was  a  non-resident.  Notice  to  him 
could  certainly  be  given  by  publication,  in  accordance  with  the 
statute.  Why  could  not  this  have  been  done  ?  It  was  said  that 
he  received  notice  as  trustee.  But  this  would  not  prevent  notice 
to  him  as  director.  What  excuse  can  be  offered  for  not  notify- 
ing him  by  publication  1  This  would  have  brought  them  within 
the  provisions  of  the  deed  of  trust. 

If  the  facts,  as  alleged  in  the  answer,  were  all  true,  and  it 
appeared  that  the  road  and  all  the  property  were  abandoned, 
and  it  was  absolutely  impossible  to  give  any  notice  to  any  body, 
and  in  the  mean  time  creditors  had  no  other  means  of  saving 
their  rights,  whilp  such  a  state  of  facts  might  be  urged  with 
great  force  for  a  court  of  equity  to  assert  jurisdiction  for  the 
protection  of  all  parties  interested,  upon  all  these  facts  being 
brought  before  such  court,  I  think  it  very  clear  that  a  single 
creditor,  without  regard  to  the  rights  of  others,  without  showing 
the  court  this  state  of  facts,  can  not,  upon  a  single  affidavit  or 
petition,  ask  a  court  to  make  an  order  to  protect  his  rights,  and 
without  really  taking  into  its  own  hands  the  property  itself  for 
the  benefit  of  all  parties,  owners  as  well  as  creditors. 

Cases  have  been  produced  to  us  to  show  that  a  corporation, 
by  abandonment  and  non-user  of  its  franchises,  forfeits  those 
franchises.  Suppose  this  to  be  so ;  I  can  not  see  how  it  woul(J 
help  these  appellants.  To  whom  would  such  franchise  be  for- 
feited ?  Evidently  to  the  sovereignty  from  which  they  emanated. 


282  WASHINGTON  R.  R.  CO.  v.  ALEX.  R.  R.  CO.; 

Tliis  would  not  allow  individuals  to  seize  upon  them.  They  could 
not  take  advantage  of  such  forfeiture.  The  new  company  could 
not  derive  its  existence  from  such  a  source. 

It  is  objected  that  the  application  for  the  order  was  not  made 
by  a  person  authorized  to  do  so  by  the  holders  of  three-fifths  of 
the  bonds.  I  very  much  doubt  whether  the  evidence  fully  es- 
tablishes that  any  other  than  the  person  named,  Benjamin 
Thornton,  was  the  holder  at  the  precise  time. 

It  is  very  evident  that  Charles  M.  Wilkes  was  the  holder, 
and  entitled  to  hold  within  a  very  few  days  thereafter  and  some 
time  before  the  sale,  whether  he  was  the  owner  or  not,  and  en- 
titled, as  such  holder,  to  determine  whether  he  would  allow  them 
to  be  converted  into  cash  or  to  remain  on  interest  at  seven  per 
cent,  or  whether  they  should  become  extinguished  in  his  hands 
by  the  conversion  of  the  security  into  cash  to  go  into  the  hands 
of  a  trustee  not  required  to  give  security,  and  with  whose  ap- 
pointment he  has  nothing  to  do,  and  whom  he  might  not  be  able 
to  compel  to  pay  to  him  the  money  to  which  he  was  entitled. 

Suppose,  however,  that  we  are  wrong  in  coming  to  the  con- 
clusion that  this  order  appointing  the  trustee  should  be  set  aside, 
the  admitted  facts  of  this  case  show  very  plainly,  I  think, 
that  the  sale  should  be  set  aside  on  the  ground  of  facts  occur- 
ring after  such  order.  Suppose  that  Stewart  were  the  proper 
trustee,  invested  with  all  the  power  of  the  original  trustee,  he 
has  simply  a  naked  power  to  sell.  His  authority  is  based  only 
upon  the  deed  of  trust,  and  he  must  pursue  the  provisions  of  the 
deed  strictly.  He  must  be  able  to  justify  his  act,  not  by  any 
presumption  or  inference,  but  positively  and  necessarily.  The 
divesting  of  the  franchises  and  property  of  a  railroad  company 
is  not  to  be  permitted  upon  a  doubtfully  exercised  power  of  a 
mere  naked  trustee. 

The  first  step  taken  is,  to  say  the  least  of  it,  a  very  doubtful 
one.  Sale  can  be  made  only  on  the  request,  in  writing,  of  the 
holders  of  at  least  three-fifths  of  the  bonds.  Now,  the  request 
in  writing  was,  as  specified  by  Davison,  as  agent  and  attorney 
in  fact  of  the  owners  of  more  than  three-fifths  of  the  bonds. 
This  is  liable  to  two  objections :  first,  there  was  no  writing  then 
produced  from  even  the  owners  of  the  bonds.  There  was  a 
writing  from  Davison,  but  this  was  not  founded  upon  a  writing 


VIRGINIA  MILITARY  COURT  OF  APPEALS.  283 

from  the  owner.  There  is  not,  to  this  day,  written  evidence 
that  the  owner  then,  at  that  time,  had  ever  authorised  this  de- 
mand; second,  even  if  Davison  was  the  agent  of  the  owners, 
this  does  not  necessarily  imply  that  he  was  the  agent  of  the 
holder.  An  owner  may,  and  often  does,  divest  himself  for  a 
time  of  the  possession  and  right  to  hold  his  property ;  and  for 
all  that  appears  in  this  written  notice,  this  may  have  been  done. 
More  than  this:  the  reasonable  probability  from  the  evidence 
is,  that  this  was  actually  done  at  the  time  of  giving  this  notice. 
While  this  fact  may  'not  appear  to  be  sufficiently  established  to 
set  aside  an  order  of  court,  it  does  appear  sufficiently  to  throw 
great  doubt  upon  the  power  of  the  trustee  to  proceed  to  the 
sale.  Certainly,  at  the  time  of  the  sale,  Thornton  was  not  in  a 
position  to  deliver  up  the  bonds,  or  to  require  the  delivery. 
But  let  us  look  further  at  the  subsequent  conduct  of  this  trustee, 
and  the  circumstances  of  the  sale. 

A  trustee  is  the  agent  of  both  parties.  He  is  especially  of 
the  party  constituting  him  such  trustee.  His  duty  is  to  be  per- 
fectly fair  in  all  his  conduct,  and  especially  to  see  that  the  in- 
terests of  the  party  who  has  conferred  upon  him  this  power  are 
protected  to  the  fullest  extent.  His  action  has,  'therefore,  been 
held  to  be  especially  the  subject  of  inquiry  by  a  court  of  equity, 
Gibson'' s  Heirs  v.  Jones,  5  Leigh,  370 ;  and  as  such  it  is  his  duty 
to  do  all  that  can  reasonably  be  done  to  effect  the  most  advan- 
tageous sale  possible.  It  has,  therefore,  been  the  common  prac- 
tide  of  our  courts  to  require  that  in  all  such  sales,  if  there  are 
prior  liens,  either  contested  or  doubtful,  or  not  precisely  ascer- 
tained, such  liens  shall  be  ascertained,  so  that  they  may  be 
made  known  to  the  purchaser,  Cole's  Administrator  v.  M'Rae, 
6  Rand.  644;  Eossett  v.  Fislier  and  others,  11  Gratt.  492;  15 
Gratt.  83  and  103.  Otherwise,  how  is  it  possible  that  there 
could  be  any  thing  like  a  fair  sale  of  the  property  ?  Now,  what 
were  the  facts  in  this  case  ?  The  affairs  of  the  road  were  con- 
fessedly, and  in  fact  charged  to  be  by  the  defendants  themselves, 
in  a  most  complicated  condition.  There  were  numerous  judg- 
ments, and  two  deeds  of  trust.  Most  of  the  judgments,  it  is 
true,  were  in  fact  subsequent  to  the  deed  of  trust.  But  the  fact, 
should  have  been  well  ascertained  as  to  which  were  prior  and 
which  were  subsequent.  There  were  a  large  number  of  liabilities 


284  WASHINGTON  R.  R.  CO.  v.  ALEX.  R.  R.  CO.; 

of  the  company,  and  as  the  defendants  themselves  allege,  per- 
sons owning  these  liabilities  were  making  them  known  even  at 
the  sale.  The  question  of  the  validity  of  the  two  prior  deeds  of 
trust  was  openly  made  at  the  sale.  The  trustee  of  the  deed  of 
trust  for  $60,000  was  present  at  the  sale,  asserting  its  validity, 
while  Stewart  says,  in  his  deposition,  "  I  at  the  same  time  saw 
fit  openly  to  dispute  the  validity  of  both  the  deeds  of  trust  of 
the  corporation  of  Washington,  and  Fowle,  Snowden  &  Co.,  as 
valid  liens  upon  the  road;"  and  the  record  shows  that  there  is 
at  this  time  a  contest  in  the  courts  concerning  the  validity  of 
this  first  deed  of  trust. 

Now,  under  such  circumstances,  was  it  possible  that  there 
could  be  any  thing  like  a  reasonable  sale  ?  How  could  a  pur- 
chaser have  any  knowledge  of  what  he  was  buying  ?  The  Code 
provides,  ch.  61,  sec.  29,  that  when  a  purchasers  made  of  the 
works  and  property  of  a  corporation,  the  purchaser  shall  not  be 
entitled  to  the  debts  due  to  the  first  company,  nor  be  liable  for 
any  debts  of  or  claims  against  the  company,  "  which  may  not 
be  expressly  assumed  in  the  contract  of  purchase." 

The  defendants  contend  that  by  this  sale  a  new  company 
was  formed.  If  this  be  so,  ought  not  the  contract  of  purchase 
show  whether  the  debts  and  liabilities  of  the  old  company 
were  assumed?  Ought  there  not  to  have  been  at  the  sale  an 
understanding  whether  it  was  sold  subject  to  the  debts  and  lia- 
bilities of  the  old  company  or  not  ?  If  not,  then  the  purchaser 
should  know  it,  for  it  would  make  a  material  difference  in  his 
bid.  Certainly  this  ought  not  to  be  left  to  the  mere  will  of  the 
purchaser,  after  he  has  made  his  bid.  The  matter  ought  to 
have  been  clearly  and  plainly  understood  at  the  sale,  and  I 
think  it  would  have  been  proper,  if  not  necessary,  that  the  ad- 
vertisement of  the  sale  should  have  stated  how  the  sale  would 
be  made.  It  should,  at  least,  have  been  made  known  generally, 
as  well  as  to  the  purchaser,  Hay,  whether  the  sale  was  subject 
to  the  debts  and  liabilities  of  the  old  company  or  not. 

Again,  the  record  discloses  that  Stewart,  who  all  the  time 
professed  to  act  in  the  capacity  of  attorney  for  the  purchaser, 
Hay,  had  already  in  his  hands  more  than  sufficient  money,  the 
property  of  the  company,  to  pay  all  that  was  then  due  upon  the 
bonds.  This  fact  Hay  must  be  presumed  to  have  known,  and  to 


VIRGINIA  MILITARY  COURT  OF  APPEALS.  285 

have  purchased  with  this  knowledge.  That  the  interest  of  the 
seller  was  not  properly  attended  to,  is  further  seen  by  the  fact  that 
the  United  States  Government  had  possession  of  the  road  during 
all  this  time,  and  it  was  a  well-known  fact  that  possession  could 
not  then  be  delivered;  and  no  one  could  tell  when  it  would  be, 
or  what  claims  the  Government  would  have  upon  it  when  so  de- 
livered. It  was  impossible  that,  under  such  circumstances,  a 
sale  could  be  made  otherwise  than  at  a  ruinous  sacrifice.  The 
position  of  Stewart  was,  to  say  the  least  of  it,  a  peculiar  one. 
He  was,  if  properly  appointed,  the  trustee  to  make  the  sale,  and 
as  such,  in  duty  bound  to  effect  the  best  possible  sale ;  and  the 
attorney,  at  law  and  in  fact,  of  Hay,  the  purchaser,  and  as  such 
interested  to  procure  the  sale  on  the  loivcst  possible  terms.  More 
than  this,  he  had  made  an  agreement  in  writing  with  Davison, 
in  which  he  stipulates  what  he  will  do,  "on  behalf  of  himself 
and  constituents,"  in  case  the  road  be  purchased  by  himself  or 
constitiients ;  showing  that  he  was  then  contemplating  a  purchase 
by  himself,  as  well  as  by  his  principal  and  client.  Can  he  be 
said  to  have  been  perfectly  impartial  and  disinterested  I  Is  it 
possible  that  a  trustee  for  sale  can  at  the  same  time  be  attorney 
at  law  and  in  fact  for  the  purchaser,  and  acting  in  his  interests? 
Stewart,  in  fact,  did  immediately  become  interested  in  the  pur- 
chase. He  had  also  previously  been  appointed,  by  writing,  the 
attorney  for  Davison,  the  agent  of  the  bondholders,  and  as  such 
was  to  receive  from  him  a  large  contingent  fee  in  case  of  a  sale 
of  the  road;  he  to  use  all  diligence  in  the  closing  out  and  per- 
fecting the  interest  of  said  bondholders  in  and  to  said  road. 
(What  interest  had  the  bondholders  in  the  road,  except  to  re- 
ceive the  money  which  might  be  realized  from  the  sale?) 

On  this  writing  there  was  indorsed  by  Joseph  Thornton,  May 
3,  1862,  "There  will  go  to  Mr.  Stewart  $35,000  of  stock  out  of 
the  $142,000  set  over  to  me,  his  $35,000  being  subject  to  a  pro 
rata  deduction  in  making  up  the  $50,000,  or  whatever  may  be 
used  of  that  amount,  which  is  set  apart."  This  $50,000,  it 
otherwise  appears,  was  to  be  set  apart  for  procuring  a  charter 
from  Congress.  It  is  true  that  Stewart  testifies  that  no  agree- 
ment was  effected  with  Davison  and  Thornton  before  tlie  sale. 
But  these  papers  appear  to  have  been  executed ;  and  he  himself 
testifies  that  the  probabilities  and  feasibilities  of  forming  a  new 


286  WASHINGTON  R.  R.  CO.  t>.  ALEX.  R.  R.  CO.; 

company  were  much  discussed,  and,  as  he  says,  "in  the  event 
that  either  Thornton  or  Davison  became  the  purchaser,  the 
question  of  who  would  take  an  interest,  and  how,  was  much 
figured  over  as  a  thing  entirely  prospective,  and  it  was  agreed, 
if  I  saw  fit  to  do  so,  1  could  be  one  of  the  parties  forming  the  new 
company"  These  facts  show,  I  think,  that  Stewart  was  at  least 
so  far  interested  in  the  purchase  as  to  render  it  impossible  for 
him  to  act  as  trustee  with  that  propriety  which  a  court  of 
equity  requires. 

It  further  appears,  that  no  money  was  ever  paid  to  the 
holder  of  the  bonds  from  the  proceeds  of  the  sale,  but  they  were 
still,  by  the  permission  of  said  trustee,  and  at  the  request  of  Jo- 
seph Thornton,  allowed  to  remain  in  the  bank  of  Riggs  &  Co., 
at  Washington,  as  the  basis  of  a  loan  to  Benjamin  Thornton 
from  one  AYilkes,  of  something  over  two  thousand  pounds,  and 
a  portion  of  the  proceeds  were  used  in  reorganizing  the  new  com- 
pany. A  company  was  immediately  organized,  of  which  Stewart 
was  the  secretary  and  a  large  stockholder,  and  stock  was  issued 
to  the  amount  of  $300,000.  This  fact  tends  strongly  to  show 
that  the  object  of  the  sale  was  not  so  much  to  satisfy  the  amount 
due  upon  the  bonds,  and  in  accordance  with  the  real  wish  of  the 
holder  of  the  bonds,  as  it  was  to  get  the  title  of  the  old  com- 
pany into  the  hands  of  these  parties,  who  were  devising  a  plan 
by  means  of  which  they  could  form  a  new  company,  and  which 
had  been  much  "figured  over"  by  all  these  parties,  including 
the  trustee. 

By  special  act  of  Assembly,  this  new  company  was  soon  after 
authorized  to  issue  stock  to  the  amount  of  $500,000,  besides 
bonds  to  the  amount  of  $200,000,  and  notes  to  the  amount  of 
$100,000. 

Stock  has  been  issued  to  a  large  amount  in  excess  of  the 
amount  authorized,  as  the  decree  states,  and  bonds,  etc.,  have 
also  been  issued,  and  out  of  this  money  has  been  raised  and 
in  part  expended  for  the  benefit  of  the  road;  so  that  it  will 
be  seen  that  other  parties  have  equities  in  the  road,  which 
should  be  provided  for.  This  history  of  the  transactions  con- 
nected with  the  sale  must  show,  I  think,  that  even  if  the 
order  appointing  Stewart  was  perfectly  valid,  yet  the  sale  was 
conducted  in  such  a  manner,  and  shows  such  a  state  of 


VIRGINIA  MILITARY  COURT  OF  APPEALS,  287 

actual  fraud,  that  it  can  not  be  sustained  .by  a  court  of 
equity. 

It  is  urged  upon  us  with  great  earnestness  and  force,  that 
even  if  such  order  \\ere  void,  and  the  sale  was  an  illegal  and 
fraudulent  one,  yet  that  the  company,  taking  no  steps  for  a 
period  of  four  years,  and  allowing  the  stockholders  of  the  new 
company  to  invest  large  sums  of  money  on  the  faith  of  the  va- 
lidity of  such  sale,  without  being  cognizant  of  such  fraud,  the 
old  company  should  be  considered  as  having  acquiesced  in  such 
sale,  and  should  now  be  estopped  from  contesting  such  validity 
as  against  them.  There  are  cases  which  show  that  acquiescence 
in  sales  made  by  order  of  a  court  of  competent  jurisdiction  for 
a  long  period,  shall  be  regarded  as  a  waiver  of  the  right  to  con- 
test the  validity  of  such  sales.  In  extreme  cases,  where  there 
has  been  long  acquiescence,  sales  made  by  the  order  of  the  court 
have  been  sustained,  on  the  ground  that  judicial  sales  ought  to 
receive  the  highest  possible  sanction,  and  should  be  regarded  as 
giving  the  utmost  possible  protection  to  the  purchaser. 

But,  in  the  first  place,  the  acquiescence  which  is  shown  in 
this  case  is  not  of  such  a  character  as  I  think  should  be  regarded 
as  an  estoppel. 

The  parties  who  alone  could  object  for  the  old  company  were 
in  such  a  situation  that,  so  far  as  they  were  concerned,  it  was 
for  nearly  the  whole  period  a  forced  acquiescence.  True,  they 
had  gone  into  the  lines  of  public  enemies  against  the  United 
States,  and  had  gone  voluntarily ;  but  whatever  may  be  said  of 
the  wrongful  nature  of  said  acts,  yet  they  were  in  such  a  situation 
that  it  can  not  be  said  that,  during  this  period,  they  voluntarily 
acquiesced  in  the  disposition  of  their  property.  Besides,  up  to 
August,  1865,  the  Government  was  in  actual  and  exclusive  pos- 
session and  control  of  all  this  property;  and  while  it  was  so,  I 
do  not  think  any  party  could  be  justified  in  claiming  to  act  in 
entire  ignorance  of  all  claims  that  might  be  brought  against  it. 
I  can  not  give  any  countenance  to  the  claim  that  the  Govern- 
ment held,  as  a  tenant  of  Hay  under  a  contract  made  by  him, 
as  a  mere  creditor,  and  with  no  claim  upon  the  road,  except 
such  as  might  have  been  satisfied  by  the  payment  of  $5,000. 

Again,  so  far  as  the  sale  was  concerned,  it  was  not  a  judicial 
one.  The  court  had  nothing  to  do  whatever  with  the  sale.  The 


288  WASHINGTON  R.  R.  CO.  v.  ALEX.  R.  R.  CO. 

court  simply  substituted  one  trustee  in  the  place  of  another.  The 
court  did  not  direct  the  sale.  The  sale  was  not  professed  to 
have  been  made  by  any  other  authority  than  that  of  a  trustee, 
with  no  power  to  guarantee  the  title,  who  did  not  profess  to 
guarantee  the  title,  and  the  purchaser  was  bound  to  make  in- 
quiry and  to  fully  investigate  the  sources  of  his  authority,  and 
if  he  neglected  to  do  so,  it  was  his  own  neglicence.  And  such 
a  sale  is  not  at  all  like  one  where  a  purchaser  has  an  order  of  a 
court  of  competent  jurisdiction,  and  which  he  is  authorized  to 
presume  to  be  correct. 

Again,  a  corporation  can  not  be  created  by  mere  acquies- 
cence. This  can  be  done  only  by  positive  act  of  legislation,  or 
by  some  power  authorized  by  some  legislative  act.  Still,  under 
the  circumstances  of  this  case,  the  new  company  ought  to  have 
reimbursed  to  it  the  money  which  it  has  actually  expended  for 
the  benefit  of  the  road,  which  ought  to  go  to  its  stockholders. 

A  very  large  portion  of  the  money  invested  by  the  stock- 
holders seems  to  have  been  upon  representations  for  which  the 
old  company  could  be  in  no  wise  responsible,  and  it  certainly 
could  not  be  regarded  as  having  acquiesced  in  them.  Much  of 
it  has  been  upon  false  and  spurious  certificates  of  stock,  issued 
by  the  new  company;  but  the  remedy  of  those  who  have  thus 
been  deceived  is  upon  those  whom  they  have  trusted.  Their 
case  is  an  extremely  hard  one,  and  appeals  strongly  to  our 
sympathies,  and  so  far  as  they  can  be  lawfully  protected,  they 
should  be. 

They  claim  that  a  very  large  amount  (several  hundred  thou- 
sand dollars)  has  been  expended  for  the  benefit  of  the  road,  and 
provision  should  be  made  for  the  repayment  of  so  much  of  this 
as  they  can  establish  ;  and  this  can  be  done  under  the  decree 
as  it  now  stands,  and  such  further  orders  as  may  be  made  by 
the  court  upon  a  consideration  of  the  evidence  which  may  be 
produced. 

The  new  Company  procured  a  special  act  to  be  passed  by 
the  Alexandria  Legislature,  February  5,  1863,  declaring  this 
sale  to  be  a  valid  one.  This  act  was  in  plain  violation  of  the 
Constitution,  and  therefore  void.  It  was  an  assumption  of  judi- 
cial power  by  the  Legislature. 

Art.  ii,  Constitution  of  Virginia,  declared  "the  legislative, 


JAMES  v.  RAILROAD   COMPANY.       J^0       —  289 

executive,  and  judicial  departments  shall  be  separate  and  dis- 
tinct, so  that  neither  shall  execute  the  powers  properly  belonging 
to  either  of  the  others. 

Art.  iv,  section  35,  provides  that  the  General  Assembly  shall 
not,  by  special  legislation,  grant  relief  in  a  case  of  which  the 
courts  or  other  tribunals  may  have  jurisdiction. 

Besides,  it  attempts  to  divest  antecedently  vested  rights,  and 
also  to  impair  the  obligation  of  the  contracts  between  the  par- 
ties. See  Taylor  v.  Stearns,  et  al,  18  Gratt.  244,  274. 

I  can  see  no  necessity  for  giving  a  construction  to  the 
statute  relating  to  the  sale  of  the  works  and  property  of  a  cor- 
poration, and  the  powers  and  privileges  of  the  purchaser  at  such 
sale,  sections  28  and  29,  ch.  61,  of  Code  of  I860.  This  is  a 
matter  rather  for  the  new  company  and  those  connected  there- 
with to  settle  among  themselves,  and  suits  are  now  pending,  as 
I  am  informed,  to  determine  the  questions  between  them. 

The  decree  of  the  court  below  very  properly  provides  for  an 
investigation  into  the  equitable  interests  of  the  several  parties  to 
this  controversy,  and  for  security  for  their  protection,  and  I  see 
no  reason  why  it  should  not  be  fully  affirmed.  DECREE  AFFIRMED. 

BURNHAM,  J.,  dissented. 


JAMES,  et  al,  v.  RAILROAD  COMPANY. 

{Decided  at  the  December  term,  1867,  of  the  Supreme  Court  of  the 
United  States,  Justice  SAMUEL  NELSON  delivering  the  opinion.  Reported 
in  6  Wallace,  752.] 

Where,  under  the  laws  of  Wisconsin,  a  mortgage  by  the  La  Crosse  and  Milwau- 
kee Railroad  Company  upon  its  railroad  and  appurtenances  had  been  fore- 
closed, a  sale  made  and  confirmed,  and  a  new  company  under  the  name  of  the 
Milwaukee  and  Minnesota  Railroad  Company  had  been  organized  by  the 
purchasers,  being  the  directors  who  made  the  mortgage  and  others  holding 
the  bonds  secured  thereby,  this  Court,  upon  a  creditor's  bill  filed  by  judg- 
ment creditors  of  the  mortgagor,  held,  on  the  facts  of  the  case,  that  the  sale 
was  fraudulent,  and  that  it  should  be  set  aside,  and  the  new  company  per- 
petually enjoined  from  setting  up  any  right  or  title  under  it;  the' mortgage 
to  remain  as  security  for  the  bonds  in  the  hands  of  bona  fide  holders  for 
•value,  and  that  the  judgment  creditors  (the  present  complainants)  be  at 

19 


290  JAMES  v.  RAILROAD   COMPANY, 

liberty  to  enforce  their  judgments  against  the  defendants  therein,  subject  to 
all  prior  incumbrances. 

Where  the  notice  of  the  sale  of  a  railroad  under  mortgage  to  secure  railroad 
bonds,  set  forth  that  the  sum  due  under  the  mortgage  for  the  principal  of 
bonds  was  §2,000,000,  with  $70.000  interest,  when,  in  fact,  less  than  $200,000 
was  outstanding  in  the  hands  of  bona  fide  holders  for  value,  the  remainder 
of  the  $2,000,000  being  either  in  the  hands  of  the  directors  or  under  their 
control,  such  a  notice  was  fraudulent,  and  of  itself  sufficient  to  vitiate 
the  sale. 

APPEAL  from  the  Circuit  Court  for  Wisconsin ;  James, 
Braver,  Grccnleaf,  Justice,  and  others,  being  the  appellants, 
and  the  Milwaukee  and  Minnesota  Railroad,  appellee. 

Messrs.  Cary  and  Carlisle,  for  the  appellants.  Messrs.  Cush- 
ing  and  Stark,  for  the  appellee. 

Mr.  Justice  NELSON  stated  the  case,  and  delivered  the  opinion 
of  the  Court : 

The  bill  before  us  is  a  creditor's  bill,  filed  by  four  different 
judgment  creditors,  against  the  defendants,  to  set  aside,  as 
fraudulent  and  void  against  creditors,  the  sale  under  a  mortgage 
made  to  Barnes,  21st  of  June,  1858,  for  two  millions  of  dollars, 
by  the  La  Crosse  and  Milwaukee  Railroad  Company,  which  sale 
took  place  on  the  21st  of  May,  1859,  and  under  which  the  de- 
fendants' company  was  organized ;  and  that  the  company  be 
perpetually  enjoined  and  restrained  from  exercising  any  control 
over  the  property  or  franchises  mentioned  in  said  mortgage,  or 
from  interfering  in  any  manner  with  the  road  or  its  franchises; 
and,  further,  that  the  said  company  be  decreed  to  take  nothing 
under  the  sale,  and  that  the  property  and  franchises  of  the  La 
Crosse  and  Milwaukee  Company  may  be  sold  and  applied,  after 
discharging  all  prior  liens,  to  the  satisfaction  of  the  judgments 
of  the  complainants. 

The  complainants  consist  of  the  firm  of  F.  P.  James  &  Co., 
who  are  the  owners  of  a  judgment  against  the  La  Crosse  and 
Milwaukee  Company  for  $20,358.51,  recovered  in  the  District 
Court  of  the  United  States  for  the  District  of  Wisconsin,  on  the 
5th  of  October,  1858,  in  favor  of  Edwin  C.  Litchfield,  and  which 
came  to  the  complainants  by  assignment. 

Nathaniel  S.  Bouton,  who '  recovered  in  the  same  court  a 
judgment  against  the  same  company  for  $7,937.37,  on  the  5th 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  291 

of  April,  1859,  and  which  judgment  came  to  the  firm  of  F.  P. 
James  &  Co.,  by  assignment ;  Philip  S.  Justice  and  others,  who 
recovered  a  judgment  in  the  Circuit  Court  of  Milwaukee  County 
against  the  same  company  for  $235.33;  and  E.  Bradford  Green- 
leaf,  a  judgment  in  the  same  court  against  the  same  company 
for  $840.06.  These  judgments  were  liens  on  the  La  Crosse  and 
Milwaukee  Railroad,  subsequent  to  the  mortgage  to  Barnes,  al- 
ready referred  to,  which,  with  the  sale  under  it,  is  sought  to  be 
set  aside  as  fraudulent  and  void  against  creditors. 

The  mortgage  was  given  to  secure  the  payment  of  an  issue 
of  bonds  for  two  millions  of  dollars,  on  the  21st  of  June,  1858, 
and  which  were  issued  accordingly  by  the  president  and  secre- 
tary, and  were  made  payable  in  thirty  years,  one  thousand 
bonds  of  one  thousand  dollars  each,  fourteen  hundred  of  five 
hundred  dollars  each,  and  three  thousand  of  one  hundred  dollars 
each,  interest  at  seven  per  cent,  payable  semi-annually  on  the 
first  day  of  January  and  July  in  each  year,  with  coupons  at- 
tached. The  sale  under  the  mortgage  took  place  on  default  of 
the  payment  of  the  first  installment  of  interest,  six  months  after 
it  was  executed.  Barnes,  the  mortgagee,  acted  as  auctioneer, 
and  bid  off  the  property  himself,  as  trustee  for  the  bondholders, 
who  soon  after  organized  the  Milwaukee  and  Minnesota  Railroad 
Company,  one  of  the  defendants  in  this  suit. 

As  appears  from  the  proofs  at  the  time  of  this  sale,  there 
had  not  been  two  hundred  thousand  dollars  advanced  on  the 
entire  issue  of  the  two  millions  of  bonds ;  indeed,  the  actual 
amount  is  but  little  over  one  hundred  and  fifty  thousand  dollars. 
Five  hundred  and  fifty  thousand  dollars  of  the  bonds  do  not  ap- 
pear to  have  been  negotiated  at  all,  which  Avere  held  in  trust  and 
never  used,  and  one  hundred  and  three  thousand  had  been  re- 
turned and  canceled,  making  in  the  aggregate  six  hundred  and 
fifty-three  thousand.  Four  hundred  thousand  were  given  to 
Chamberlain  to  secure  a  note  of  the  company  for  $20,000, 
which  he  sold  at  auction,  and  which  were  bid  in,  principally,  by 
the  directors,  at  five  cents  on  the  dollar.  Three  hundred  and 
ten  thousand  dollars  of  the  bonds  were  given  to  secure  a  loan 
of  $15,000,  and  which  came  into  the  hands  of  the  same  persons, 
or  their  friends,  for  about  five  cents  on  the  dollar. 

It  is  charged  in  the  bill,  and  the  proofs  are  very  strong  in 


292  JAMES  v.  RAILROAD   COMPANY. 

support  of  it,  that  this  note  to  Chamberlain  for  $20,000,  and  the 
loan  of  815,500,  to  secure  the  payment  of  which  these  bonds 
were  given — $400,000  in  amount  for  the  first  sum,  and  $310,- 
000  for  the  second — were  made  by  the  company  for  the  pur- 
pose, and  with  the  intention,  of  obtaining  a  division  of  them, 
among  the  directors,  at  merely  nominal  prices.  It  is  very  fully 
established  that  this  was,  in  point  of  fact,  the  result  of  the  two 
transactions. 

We  have  looked  with  some  care  into  the  proofs,  and  into  the 
brief  of  the  learned  counsel  for  the  defendants,  to  ascertain  the 
portion  or  amount  of  these  bonds,  or  of  the  stock  of  the  Milwaukee 
and  Minnesota  Company,  into  which  some  of  them  were  con- 
verted, that  are  now  in  the  hands  of  bona  fide  holders,  and  we 
find  no  evidence  in  the  record  tending  to  show  any  amount  be- 
yond the  sum  already  mentioned,  less  than  $200,000.  These 
were  the  only  outstanding  bonds  existing  at  the  time  of  the 
foreclosure  and  sale  for  which  value  had  been  paid ;  the  re- 
mainder of  the  two  millions  of  dollars  were  either  in  the  hands 
of  the  directors  or  under  their  control,  and  not  negotiated,  or, 
they  were  in  their  hands  under  the  fraudulent  arrangements  we 
have  already  stated,  at  nominal  prices.  Nor  do  we  find  that  the 
present  holders  of  the  bonds  or  stock  of  the  company  are  in  any 
better  or  more  favorable  condition  than  those  who  organized  the 
defendants. 

The  notice  of  sale  set  forth  that  the  mortgage  debt  was  two 
millions  of  dollars,  and  that  seventy  thousand  dollars  of  interest 
were  due. 

It  needs  no  authorities  to  show  that  such  a  sale  can  not  be 
upheld  without  sanctioning  the  grossest  fraud  and  injustice  to 
the  La  Crosse  and  Milwaukee  Company,  the  mortgagee,  and 
its  creditors.  This  deceptive  notice  was  calculated  to  destroy 
all  competition  among  the  bidders,  and,  indeed,  to  exclude  from 
the  purchase  every  one,  except  those  engaged  in  the  perpetra- 
tion of  the  fraud.  The  sale,  therefore,  must  be  set  aside,  and 
the  Milwaukee  and  Minnesota  Company  be  perpetually  enjoined 
from  setting  up  any  right  or  title  under  it — the  mortgage  to 
remain  as  security  for  the  bonds  in  the  hands  of  bona  fide 
holders  for  value;  and  that  the  judgment  creditors,  the  com- 
plainants, be  at  liberty  to  enforce  their  judgments  against 


ROSTETTER  v.  GRANT. 


the    defendants    therein,    subject    to   all   prior  liens   or  incum- 
brances. 

Mr.  Justice  MILLER  dissented. 


JOHN  B.  ROSTETTER  AND  WIFE  v.  WILLIAM  C.  GRANT. 

[Decided  at  the  December  term,  1868,  of  tJi^  Supreme  Court  of  Ohio, 
Justice  JOHN  WELCH  delivering  the  opinion.    Reported  in  18  Ohio  St.  126.] 

Where  a  husband,  holding  title  to  land  in  trust  for  his  wife,  at  her  request  bar- 
gains and  sells  the  same  to  a  stranger,  a  specific  execution  of  the  contract 
will  be  decreed  against  the  husband,  at  the  suit  of  the  purchaser,  although 
the  wife  joins  the  husband  in  resisting  the  same. 

As  the  right  of  the  wife  in  such  case  is  a  mere  equity,  and  she  can  have  no 
claim  of  dower  in  the  property,  it  is  unnecessary  for  her  to  join  her  husband 
in  the  deed  of  conveyance,  in  order  to  vest  in  the  purchaser  a  title  freed 
from  her  claim;  and  it  is  not  error  in  the  court  to  order  the  husband  to 
convey  such  title. 

ERROR  TO  THE  DISTRICT  COURT  OF  STARK  COUNTY. 

THE  action  in  which  the  judgment  sought  to  be  reversed  was 
rendered,  came  into  the  District  Court  by  appeal.  The  facts  of 
the  case  are  specially  found  by  the  Court,  and  are  as  follows : 
In  1863,  the  plaintiff,  John  B.  Rostetter,  in  whom  was  vested 
the  naked  legal  title  of  land  which  in  equity  belonged  to  his 
wife,  at  her  request  bargained  and  sold  the  same  to  the  defend- 
ant, William  C.  Grant,  who  was  ignorant  of  the  wife's  right 
therein.  Part  of  the  purchase-money  was  paid  in  hand,  and  by 
the  written  contract  of  sale  Rostetter  bound  himself  to  make  a 
conveyance,  by  good  and  sufficient  warrantee  deed,  upon  pay- 
ment of  the  remainder  of  the  purchase-money,  at  a  specified 
time.  At  the  end  of  the  period  fixed,  Grant  tendered  the  re- 
mainder of  the  purchase-money  and  demanded  a  deed.  Rostet- 
ter declined  to  make  the  deed,  on  the  alleged  ground  that  his 
wife  refused  her  assent  thereto,  or  to  join  in  its  execution ;  the 
fact  being,  however,  that  she  was  willing,  and  offered  to  join  in 
the  deed,  on  the  condition  that  the  purchase-money  should  be 
paid  or  secured  to  her,  instead  of  her  husband ;  and  she  refused 


294  ROSTETTER  w.  GRANT, 

to  sign  the  deed  solely  because  the  husband  desired  her  so  to 
refuse,  and  would  not  consent  to  her  receiving  or  having  the 
money.  Grant  thereupon  filed  his  petition  in  the  Common 
Pleas  against  Rostetter,  asking  for  a  specific  execution  of  the 
contract.  The  wife,  also,  was  made  a  party  defendant,  after  the 
cause  came  into  the  District  Court,  and  she  there  filed  an  an- 
swer, in  which  she  alleges  that  she  is  unwilling  to  join  in  the 
deed  of  conveyance ;  and  prays  that  her  husband  may  be 
adjudged  and  decreed  to  convey  the  land  to  trustees  for 
her  use. 

Upon  this  state  of  facts,  the  District  Court  adjudged  and 
ordered,  that  the  contract  of  sale  should,  be  specifically  executed, 
by  Grant's  paying  the  remainder  of  the  purchase-money  into 
court,  for  the  use  of  the  wife,  and  by  Rostetter's  conveying  the 
land  to  Grant  by  good  and  sufficient  warrantee  deed,  "free  and 
clear  from  all  claims  of  his  wife." 

The  errors  alleged  are,  in  substance,  that  the  court  rendered 
a  decree  for  specific  execution,  whereas  it  should  have  ordered 
the  land  to  be  conveyed  to  the  wife.  Since  the  filing  of  the  pe- 
tition in  error  the  wife  has  died,  and  her  legal  representatives 
have  been  made  parties. 

John  M*  Sweeney,  Bierces  Pease,  and  Meyers  Mandcrson,  for 
plaintiffs  in  error.  J.  A.  Ambler,  for  defendant  in  error. 

WELCH,  J. :  We  see  no  error  in  this  decree,  to  the  injury 
of  either  of  the  plaintiffs  in  error.  The  husband  complains  of 
it,  for  the  alleged  reason  that  it  requires  him  to  coerce  his  wife 
into  the  execution  of  a  deed.  The  answer  to  this  complaint  is, 
that  the  wife  need  not  sign  the  deed.  The  full  legal  title  is  in 
the  husband,  and  his  deed  alone  will  pass  that  title  to  the  pur- 
chaser. The  wife  can  have  no  claim  for  dower,  either  in  her 
own  land,  or  in  land  held  by  her  husband  as  mere  trustee.  She 
has  either  a  right  to  the  whole  estate,  or  to  no  part  of  it ;  and 
if  she  has  a  right  to  the  whole,  it  is  a  mere  equitable  right — a 
right  to  go  into  equity  and  compel  a  conveyance  of  the  legal 
title.  This  is  precisely  what  she  is  attempting  to  do  in  the 
present  case.  She  has  no  title  which  she  can  retain,  by  re- 
fusing to  join  in  a  conveyance.  If  any  thing,  she  has  a  mere 
right  to  acquire  the  title.  The  husband,  therefore,  has  no  just 


IN  THE  SUPREME  COURT  OF  OHIO.  295 

ground  to  complain  of  this  decree.  It  only  requires  him  to 
fulfill  his  plain  and  admitted  agreement,  by  executing  his 
own  deed. 

Has  the  wife  any  just  ground  to  complain  of  the  decree  ? 
She  says  that  Grant;  not  having  completed  the  purchase,  can 
not  claim  the  right  of  an  innocent  purchaser  without  notice ;  and 
that  no  estoppel  can  be  pleaded  against  her,  as  she  is  a  married 
woman ;  and  she,  therefore,  claims  that  the  court  erred  in  refus- 
ing to  order  the  title  of  the  land  vested  in  a  trustee  for  her  use. 
But  the  title  has  already  been  vested  in  a  trustee  for  her  use. 
Why  change  the  trustee  ?  Surely,  another  can  not  be  found 
more  watchful  of  her  interests,  or  more  willing  to  subserve 
them,  even  to  the  violation  of  his  own  contracts  and  rights, 
than  her  husband  has  been.  There  seems  to  be  a  perfect  accord 
between  the  husband  and  wife  in  this  matter.  When  she  re- 
quests him  to  sell,  he  sells  j  and  when  she  requests  him  to  disre- 
gard the  contract  of  sale,  he  disregards  it.  No  danger  of  her 
interests  suffering  in  his  hands.  As  often  as  he  sells  at  a  low 
price,  he  will  get  her  to  object,  and  then  rescind  the  contract, 
until  he  shall  finally  make  a  satisfactory  sale,  perhaps  for  more 
than  it  is  worth,  and  then  he  will,  at  her  request,  ask  for  a  spe- 
cific execution.  If  the  court  had  placed  the  property  in  the 
hands  of  another  trustee  for  her  use,  as  she  requested,  surely 
one  of  the  duties  of  that  trustee  would  be  to  sell  the  property 
according  to  her  directions.  That  is  just  what  the  husband  did. 
If  her  counsel  are  right  now,  in  contending  that  no  sale  or  con- 
veyance is  valid  unless  she  joins  in  the  deed,  the  new  trustee 
would  be  as  powerless  to  sell  the  land  as  the  old  one;  and  she 
might  as  well  have  the  title  vested  in  her  own  name  at  once. 
Any  attempt  by  the  new  trustee  to  sell  her  land — especially  if 
the  land  should  happen  to  raise  in  value  after  making  the  contract 
of  sale — might  only  result  in  another  suit  like  the  present.  We 
hold  the  law  to  be,  that  as  soon  as  her  trustee,  the  husband, 
bargained  and  sold  the  land  at  her  request  to  Grant,  her  equity 
was  changed  from  the  land  to  the  purchase-money.  In  equity, 
the  land  became  the  property  of  Grant,  and  the  purchase-money 
became  hers.  There  is,  therefore,  in  the  case  no  question  of 
"purchase  without  notice,"  or  of  "estoppel,"  or  of  the  power  of 
a  court  of  chancery  to  decree  against  the  husband  a  conveyance 


3-9  v)    -296  ROSTETTER  v.  GRANT. 


of  the  estate  of  the  wife.  Rostetter  was  a  trustee,  and  the  con- 
tract of  sale,  made  by  him  at  the  request  of  his  wife,  the  cestui 
que  trust,  was  made  in  the  legitimate  exercise  of  his  powers  as 
such  trustee,  and  should  be  specifically  executed,  notwithstand- 
ing the  objection  of  the  wife.  JUDGMENT  AFFIRMED  (a). 

DAY,  C.  J.,  and  BRINKERHOFF,  SCOTT,  and  WITE,  Justices, 
concurred. 

(a)  An  agreement  by  the  trustee  of  a  married  woman,  that  the  trust  estate 
shall  be  charged  with  her  debts,  will  not  be  sufficient  to  bind  the  estate.  Her 
contract  is  indispensable  for  this  purpose.  Only  the  profits  of  a  trust  estate  held 
for  a  married  woman,  will  be  subjected  to  the  payment  of  her  debts,  Burch  v. 
Breckenridge,  16  Ben.  Monroe,  488. 

A  trustee  of  the  separate  estate  of  a  married  woman  can  maintain  a  suit  in 
his  own  name  alone,  to  recover  possession  of  the  trust  property  from  one  who  has 
seized  it  in  execution  against  the  husband  of  bis  cestui  que  trust,  M1  Clannahan  v. 
Beasley,  17  Ben.  Monroe,  117. 

Duvall  v.  Graves,  1  Bush,  461:  For  the  purpose  of  securing  to  the  wife,  who 
was  then  an  infant,  the  exclusive  right  to  all  her  estate  inherited  from  her  de- 
ceased father,  she  and  her  contemplated  husband,  in  1838,  conveyed  all  her 
property  to  her  mother,  in  trust,  with  power  to  sell  with  her  concurrence.  In 
1845,  the  trustee,  with  the  concurrence  of  the  wife,  sold  part  of  the  trust  prop- 
erty— the  deed  being  signed  by  the  wife  and  the  trustee.  After  more  than 
twenty  years,  the  husband  and  wife  brought,  suit,  for  the  recovery  of  the  prop- 
erty, on  the  ground  that  in  consequence  of  her  infancy  the  power  of  sale  was 
void  and  not  confirmable;  and  if  only  voidable,  and  therefore  confirmable,  the 
deed  of  1845  did  not  confirm  the  sale,  because,  though  not  then  an  infant,  she 
was  still  covert,  and  her  husband  did  not  join  in  the  deed.  Held,  that  the  hus- 
band's concurrence  was  not  necessary  to  a  confirmation  of  the  conveyance  of 
1845.  Within  the  scope  and  prescribed  limitations  of  the  deed  of  trust,  the  sole 
beneficial  owner  of  the  estate  was  the  wife,  and  as  such  could  consent  to  the 
sale,  by  her  trustee,  as  effectually  without  as  well  as  with  her  husband's  concur- 
rence. That  the  husband  was  estopped  by  his  deed  of  trust,  and  had  no  interest 
in  the  execution  of  the  trust;  and  the  trust  deed  being  voidable  only  by  the 
wife,  after  the  great  lapse  of  time,  and  the  equities  in  the  case,  she  could  not 
disaffirm  her  acts  by  a  suit  jointly  with  her  husband  for  the  recovery  of  the 
land  sold  in  1845. 


PARIS  v.  DUNN.  297 - 


FARIS  AND  WIFE  v.  DUNN,  et  al. 

{Decided  at  the  Slimmer  term,  1870,  of  the  Court  of  Appeals  of  Ken- 
tucky, Chief  Justice  GEORGE  ROBERTSON  delivering  the  opinion  of  the 
Court.  Reported  in  7  Bush,  276.] 

APPEAL  FROM  GARRARD  CIRCUIT  COURT. 

A  married  woman  relinquished  her  dower  in  five  hundred  acres  of  land  sold 
and  conveyed  by  her  husband  to  their  son-in-law,  on  the  condition  that  their 
single  daughter  should  have  one  hundred  acres  of  the  land,  or  its  equivalent, 
ten  thousand  dollars,  to  secure  her  a  home.  , 

True  to  the  trust,  the  father  bought  for  his  daughter  a  hundred  acres  of  land 
selected  by  her,  and  paid  for  it  with  her  money,  received  and  held  for  that 
purpose,  and  without  her  knowledge  or  consent  took  the  conveyance  of  the 
legal  title  to  himself.  Immediately  after  the  purchase  in  1852,  the  father 
put  his  daughter  in  possession  of  the  land  so  bought  for  her,  where  ever 
since  she  has  resided  as  her  only  home.  A  trust  was  thus  raised  in  favor  of  the 
daughter  in  possession,  which  was  sufficient  to  protect  her  possession  and  title 
against  the  mortgagees  of  her  father. 

Resulting  trusts  may  be  established  by  oral  testimony  as  satisfactorily  as  by  written 
evidence,  Boyd  v.  If  Clean,  1  Johnson's  Ch.  583. 

A  party  having  a  prior  subsisting  equity — an  available  resulting  trust — com- 
bined with  long  possession,  under  a  verbal  contract  not  void,  would  have  a 
sufficient  defense,  even  if  not  enforceable  as  a  trust  against  parties  in  the 
adverse  possession. 

A  good  defense  to  a  party  in  possession  of  land,  might  not  be  enforceable  as  a 
good  cause  of  action  against  another  party  in  the  adverse  possession  of  the 
same  land. 

Before  a  devisee  can  be  required  to  make  an  election,  the  will  must  clearly  show 
that  the  testator  so  intended.  Every  case  of  election  therefore  supposes  a 
plurality  of  gifts  or  rights,  with  an  intention,  express  or  implied,  of  the 
party  who  has  the  right  to  control  one  or  both,  that  one  should  be  substi- 
tuted for  the  other. 

Not  being  pleaded,  the  question  of  estoppel  was  not  litigated  in  this  case. 

Purchaser  of  one's  own  land  at  a  decretal  sale — purchaser  is  released  from 
bonds  for  purchase  price  in  this  case.  See  opinion  and  response  of  the 
Court  for  the  facts  and  reasons  for  this  decision;  and  the  surety  is  still 
required  to  litigate  his  liability  on  the  bonds  for  the  purchase  of  the  land, 
as  if  substituted  to  the  place  of  the  principal,  while  the  principal  is  fully 
released.  See  the  opinion  and  response  of  the  Court  for  the  facts  and 
reasons  for  this  decision. 

George  E.  WKee  and  E.  M.  &  W.  0.  Bradley,  for  appel- 
lants. Geo.  W.  Dunlap,  for  mortgagees,  Dunn,  et  al.  John  S. 
Van  Winkle,  for  W.  A.  Hoskins. 


298  FARIS  v.  DUNN, 


CHIEF  JUSTICE  ROBERTSON  delivered  the  opinion  of  the 
Court :  This  has  been  a  prolonged  and  vexatious  litigation,  and 
this  Court  lias  hitherto  reversed  three  successive  orders  of  the 
Circuit  Court,  and  remanded  the  case,  each  time  for  further 
preparation ;  but  in  no  instance  concluding  or  affecting  the  ap- 
pellant, Mrs.  Faris,  in  her  title  to  her  home,  which  is  the  ultimate 
question  involved.  And  now,  though  we  think  that  the  Circuit 
Court  again  erred  in  rejecting  the  cross-petition  of  the  appellants 
against  William  A.  Hoskins,  yet,  considering  the  case  sufficiently 
prepared  for  a  final  decision,  so  far  as  the  appellants  are  con- 
cerned, in  the  fundamental  question,  which  can  not  be  affected 
by  collateral  controversies,  we  will  at  once  proceed  to  consider 
that  vital  question,  and  to  that  extent  close  this  case. 

Before  the  year  1852,  William  Hoskins — upright,  indus- 
trious, economical,  and  provident — owned  his  homestead  tract 
of  about  five  hundred  acres  of  first-rate  land  in  Garrard  County, 
at  the  forks  of  the  turnpike  from  Lexington  to  Danville  and  to 
Lancaster,  equi-distant  from  the  bifurcation ;  and  also  seven 
valuable  slaves,  three  of  whom  were  excellent  blacksmiths,  and 
a  corresponding  personalty.  Becoming  too  old  for  such  cares, 
and  being  to  some  extent  embarrassed  by  advancements  to  most 
of  his  children  and  responsibilities  for  some  of  them,  he  sold  his 
land  to  his  son-in-law,  "  Dick  Robinson,"  who  sold  to  John  S. 
Hoskins,  who  sold  to  Richard  Robinson,  and  who  sold  to  William 
A.  Hoskins,  who  resold  to  the  said  Robinson,  the  son-in-law  of 
said  William  Hoskins,  to  whom  the  legal  title  was  conveyed,  on 
the  condition  that  original  vendor's  daughter,  Eliza  V.  Hoskins, 
now  Faris,  who  had  devotedly  dedicated  a  long  celibacy  to  the 
care  of  her  aged  parents,  and  had  never  been  advanced,  should 
have  one  hundred  acres  of  the  land,  or  its  equivalent,  ten  thou- 
sand dollars,  to  secure  her  a  home  whenever  needful.  Her 
mother  refused  to  relinquish  her  dower  unless  that  provision 
should  be  made,  and  finally  made  the  relinquishment  in  consid- 
eration of  that  plighted  lien  for  her  faithful  and  otherwise  un- 
provided-for  daughter.  She  preferring  another  hundred  acres 
in  sight  of  the  old  homestead,  and  Robinson  being  pleased  with 
her  choice,  her  father,  true  to  the  trust,  bought  for  her  the  se- 
lected tract ;  paid  for  it  with  her  money,  received  and  held  for 
that  purpose ;  and,  as  we  may  presume  from  the  record,  without 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  299 

her  knowledge  he  took  a  conveyance  of  the  legal  title  to  him- 
self, which,  when  informed  of  the  fact,  she  urged  him  to  convey 
to  her ;  but  he  deferred  it  to  his  will,  and  assured  her  that  her 
title  should  in  that  way  be  secured.  Immediately  after  that 
purchase  in  the  year  1852,  her  father  put  her  in  possession  of 
the  land  so  bought  for  her,  where  ever  since  she  has  resided  as 
her  only  home,  and  so  always  recognized  by  her  parents,  her 
brothers  and  sisters  and  neighbors,  and  for  a  long  time  by  her 
brother-in-law,  "Dick  Robinson"  himself,  for  whom  "Camp 
Dick  Robinson''  was  so  named.  Her  father  died  in  December, 
1862,  and  in  1866,  during  the  pendency  of  this  suit,  her  mother, 
who  lived  with  her,  being  also  dead,  she  intermarried  with  her 
coappellant,  James  W.  Faris.  , 

On  the  12th  of  February,  1859,  her  father,  having  become 
indebted  to  several  persons  about  eight  thousand  dollars,  on  his 
son  William's  account,  as  we  feel  authorized  to  believe,  mort- 
gaged his  slaves  and  her  u  home  "  to  indemnify  the  mortgagees, 
Dunn  and  Richardson,  and  the  said  Dick  Robinson,  for  their 
undertaking  to  pay  within  a  year  that  aggregate  debt.  She  did 
not  consent  to  the  mortgage  of  her  land,  and  her  father  resisted 
it  until  overcome,  as  one  of  them  admitted,  by  the  persuasion 
of  the  mortgagees;  and  doubtless  he  finally  yielded  under  the 
belief  that  his  son  William  would  redeem  the  mortgage,  and 
that  if  he  should  fail  to  do  so,  the  other  mortgaged  property 
would  save  her  land — as  it  might  and  probably  would  have  done 
had  the  slaves  been  opportunely  sold  by  the  mortgagees. 

In  August,  1863,  the  mortgagees  filed  a  petition  to  foreclose 
their  mortgage,  which  the  appellant,  Eliza,  resisted  as  to  her 
land  on  various  defensive  grounds.  The  Circuit  Court,  however, 
decreed  the  sale  of  that  land  alone.  At  the  sale  by  the  commis- 
sioner under  that  decree,  to  prevent  the  embarrassment  and  dif- 
ficulty that  might  result  from  a  purchase  by  a  stranger,  she, 
advised,  as  we  infer,  by  her  brother  Wiillam  (who  promised  to 
become  her  surety,  and  who,  as  appears  to  us,  said  he  would 
pay  the  debt),  bought  the  land  for  the  amount  required  to  sat- 
isfy the  mortgage,  and  executed  bonds  with  the  said  William  as 
her  surety. 

To  compel  him  to  relieve  her  from  these  bonds,  not  yet  col- 
lected, was  the  principal  object  of  her  cross-petition  against 


300  PARIS  v.  DUNN, 


him  ;  and  that  litigation  in  some  form  may  survive  our  judgment 
in  this  case,  even  though  her  petition  was  dismissed  by  the  de- 
cree appealed  from,  and  by  which  she  was  also  ordered  to  pay 
off  the  sale-bonds  or  give  up  her  home. 

Upon  the  facts  proved,  this  Court  is  satisfied  that,  waiving 
questions  of  champerty  and  limitation  on  account  of  long  and 
adverse  possession,  the  appellant,  Eliza,  for  not  only  a  good  but 
a  valuable  consideration,  is  entitled  to  the  land  in  contest,  under 
a  valid  and  available  resulting  trust.  Such  right  would  be  clear 
at  common  law ;  and  as  she  does  not  appear  to  have  consented 
to  the  conveyance  of  the  legal  title  to  her  father,  and  he  more- 
over disregarded  the  trust  by  that  nominal  conveyance,  the  20th 
section  of  the  chapter  on  real  estate,  2  Stanton,  130,  does  not 
affect  her  equitable  right,  as  recognized  and  protected  by  the 
modern  common  law  against  purchasers  with  notice  of  it ;  but 
the  22d  section  of  the  same  chapter  excepts  and  saves  it  (a). 

And  in  this  case  Robinson,  as  one  of  the  mortgagees,  being 
also  a  party  to  the  trust,  had  indisputable  and  conclusive  notice 
of  all  the  facts  from  which  the  trust  resulted,  and,  though  not 
necessary,  the  other  mortgagees  had  presumptive  notice.  They 
all  took  the  mortgage,  therefore,  subject  to  her  prior  and  still 
subsisting  equity,  which,  combined  ivitli  her  long  possession  tinder 
a  verbal  contract  not  void,  tvould  be  sufficiently  defensive  against 
them,  even  if  not  enforceable  as  a  trust  had  they  been  in  the  ad- 
verse possession,  and  she,  as  plaintiff,  had  sued  them.  She  is 
not  estopped  by  bidding  for  the  land  arid  executing  the  bonds 
for  the  price,  She  bid  for  only  what  was  beneficially  her  own, 
and  thereby  did  the  mortgagees,  who  knew  that  they  had  no 
right  to  sell  her  land,  no  harm.  Her  bonds,  therefore,  were 
executed  without  any  binding  consideration,  and  are  held  as  an 
implied  trust  of  revocation  by  her  volition. 

(a)  The  provisions  of  the  Revised  Statutes  of  Kentucky  having  a  hearing  on 
this  subject  of  resulting  trusts,  are  as  follows:  Sec.  20.  Where  a  deed  shall  be 
made  to  one  person,  and  the  consideration  therefor  shall  be  paid  by  another,  no 
use  or  trust  shall  result  in  favor  of  the  latter.  Sec.  21.  Such  deeds  shall  be 
deemed  fraudulent,  as  against  the  existing  debts  and  liabilities  of  the  person 
paying  the  consideration.  Sec.  22.  The  provisions  of  the  section  before  the  one 
next  preceding  this,  shall  not  extend  to  cases  where  the  grantee  shall  have 
taken  a  deed  in  his  own  name  without  the  consent  of  the  person  paying  the 
consideration,  or  where  the  grantee,  in  violation  of  some  trust,  shall  have  pur- 
phased  the  lands  deeded  with  the  effects  of  another  person. 


IN  THE  KENTUCKY  COURT  OF  APPEALS,  301 

There  is  no  estoppel  here,  nor  in  her  conduct  as  nominal 
executrix  associated  with  the  mortgagee,  Dunn,  as  acting  exec- 
utor j  nor  in  any  of  her  personal  conduct,  active  or  passive, 
properly  considered,  do  we  see  any  thing  that  should  estop  a 
helpless  and  confiding  woman,  always  ignorant  of  her  rights  and 
of  the  law,  and  most  of  the  time  covert,  from  continuing  to  as- 
sert her  meritorious  and  enforceable  claim  to  the  land ;  and 
insisting  on  her  exoneration  from  the  bui'den  of  again  paying  for 
it,  and  releasing  her  from  the  bonds,  and  thereby  devolving  the 
whole  obligation  on  her  co-obliger,  W.  A.  Hoskins  (who  is  equi- 
tably prosecuted),  will  do  no  injustice  to  him  or  to  the  mort- 
gagees. The  mortgagees  recklessly  included  her  land  in  the 
mortgage  against  the  mortgagor's  free  will,  and  without  her 
consent  or  knowledge,  when  they  knew,  or  ought  to  have 
known,  that  it  was  equitably  hers,  and  in  her  actual  possession, 
unassailed  and  in  conscience  unassailable.  And  moreover,  had 
they  sold  all  the  slaves  as  soon  as  they  might  have  done  so,  but 
little,  if  any,  of  the  mortgage  debt  would  have  been  left  unpaid. 
Only  by  keeping  two  of  the  blacksmiths — proved  to  have  been 
worth  fifteen  hundred  dollars  each  as  late  as  the  year  1863 — they 
lost  three  thousand  dollars  as  a  consequence  of  the  emancipation 
of  those  slaves  in  1865.  And  though  in  a  former  opinion  this 
Court  suggested  that  it  was  not  then  "prepared"  to  say  that  the 
mortgagees  should  account  for  any  of  the  slaves,  yet  subsequent 
developments  and  the  present  status  of  the  parties  have  essen- 
tially changed  the  phase  of  the  case  on  that  point.  If  the 
mortgagees  lose  any  thing,  it  is  their  own  fault. 

Nor  can  W.  A.  Hoskins  justly  complain  if  the  burden  of  the 
bonds  shall  fall  on  him,  and  thereby  this  litigation  shall,  by 
subrogation  and  transference,  be  carried  on  by  and  between  him 
and  the  mortgagees  and  executors,  as  the  parties  whose  conduct 
originated  and  prolonged  this  vexatious  and  unnecessary  strife. 
This  record  affords  intrinsic  evidence  that  he,  without  any  ap- 
parent capital  of.  his  own,  drew  on  his  father's  generosity  for 
supplies  for  speculating  adventures,  and  thereby  contributed 
largely  to  his  father's  embarrassing  change  of  condition,  other- 
wise inexplicable.  His  letters  to  his  father  and  to  his  sister 
Eliza  conduce  to  show  that  he  owed  his  father  more  than  the 
debt  for  which  the  mortgage  was  given,  and  prove  that  he 


302  FARIS   v.  DUNN, 


therefore  promised  his  father  that  he  would  relieve  him,  and 
promised  her  that  if  she  would  give  up  her  home  he  would  buy 
for  her  a  better ;  and  these  and  other  facts  indicate  that  the 
mortgage  debt  was  incurred  for  his  benefit  by  his  father,  and 
that  the  mortgage  would  never  have  been  given  if  he  had 
complied  with  repeated  promises  to  extricate  his  father  from 
embarrassment. 

Without  reference  to  other  circumstances,  we  are  satisfied, 
upon  tlie  record  now  before  us,  that  he  owed  his  father  as  much 
at  least  as  the  amount  due  on  the  mortgage,  and  therefore,  as 
between  the  appellant  Eliza  and  himself,  he  should  not  complain 
if  the  whole  burden  of  the  sale-bonds  be  put  on  him.  But  as 
his  indebtedness  to  his  father's  estate  has  not  been  litigated  be- 
tween him  and  the  mortgagees,  or-  between  him  and  Dunn,  as 
executor,  and  especially  as  the  contemplated  litigation  between 
them  as  antagonist  parties  may  evolve  other  material  facts, 
what  we  have  said  is  not  to  conclude  him  on  that  question,  or 
fetter  a  full  investigation  between  him  and  them  as  opposing 
parties.  He  will  be  entitled  to  all  credits  to  which  the  mort- 
gagor, if  living,  would  be  entitled,  in  a  contest  between  him  and 
the  mortgagees,  whether  on  account  of  any  of  the  slaves,  or 
payments  of  any  portion  of  the  mortgage  debt,  or  otherwise. 
And  these  will  be  the  principal  questions  in  the  transposed  liti- 
gation between  parties  not  hitherto  conflicting. 

From  the  foregoing  considerations,  we  conclude  that  the  ap- 
pellant, Eliza,  should  be  released  from  the  sale-bonds,  and  is 
entitled  to  conveyance  of  the  one-hundred-acre  tract  of  land  to 
her  separate  use  in  fee-simple,  unimcumbered  by  the  unpaid 
consideration,  and  that  the  payment  of  the  bonds  should  be 
settled  by  an  ulterior  litigation  on  amended  pleadings  between 
the  mortgagees  and  executor  on  one  side,  and  Wm.  A.  Hoskins 
on  the  other. 

Wherefore  the  judgment  against  the  appellant,  Eliza,  sub- 
jecting her  to  the  payment  of  the  sale-bonds  and  dismissing  her 
cross-petition,  is  reversed,  and  the  cause  remanded,  with  in- 
structions to  dismiss  the  petition  of  the  mortgagees  so  far  as  it 
v  affects  her,  and  to  cause  a  conveyance,  as  just  indicated,  to  be 
made  to  her  as  purchaser  at  the  sate  by  the  commissioner,  and 
also  to  allow  the  executors  and  mortgagees  and  Wm.  A.  Hoskins 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  303 

to  amend  their  pleadings,  so  as  to  litigate  between  themselves 
concerning  the  payment  of  the  bond  for  which  said  William  is 
now  alone  responsible  as  co-obliger. 

Judge  PETERS  dissented  from  the  foregoing  opinion. 

To  appellee's  petition  for  rehearing,  Chief  Justice  ROBERT- 
SOX  delivered  the  following  RESPONSE  : 

As  the  opinion  in  this  case  has  been  in  several  respects 
misconceived,  and  consequently  misrepresented,  we  consider  a 
brief  response  to  two  very  elaborate  petitions  for  a  rehearing 
but  respectful  to  the  zealous  counsel  who  filed  them,  and  befit- 
ting the  cause  of  harmonious  jurisprudence  and  judicial  rectitude 
and  authority.  An  anxious  scrutiny  of  the  facts  and  arguments 
urged  in  the  petitions,  and  a,  careful  reconsideration  of  the  opin- 
ions they  assail,  having  resulted  in  a  more  unanimous  adherence 
to  the  essential  facts  and  established  principles  which  sustain  it, 
we  will  proceed  with  a  very  summary  exposition  of  the  grounds 
of  complaint,  and  of  the  true  facts  and  right  law  on  which  it 
will  be  cheerfully  left  to  rest  for  the  vindication  of  its  accuracy 
and  justice.  And  in  this  condensed  review  the  order  of  the 
attack  will  be  observed. 

1.  The  resulting  trust,  Avhich  is  the  corner-stone  of  the 
opinion,  is  denied  rather  irresolutely,  without  a  denial  of  the 
indisputable  facts,  or  the  citation  of  any  authority  to  countenance 
the  negation.  The  condensed  facts  show :  first,  that  for  the 
most  meritorious  consideration  of  both  gratitude  and  paternal 
duty,  and  also  for  a  valuable  consideration,  as  recited  in  the 
opinion,  William  Hoskins  dedicated,  in  the  hands  of  the  pur- 
chaser of  his  homestead  farm,  ten  thousand  dollars,  as  a  trust 
fund,  to  secure  to  his  daughter  Eliza  a  home  of  her  own;  second, 
that  the  purchaser  paid  out  of  the  purchase-money  the  amount 
which,  reinvested,  bought  Eliza's  home,  according  to  the  requi- 
sitions of  her  father  for  that  special  purpose ;  third,  that  merely 
because  he  made  the  contract  of  reinvestment  and  was  a  pro- 
tecting father,  the  legal  title  was  conveyed  to  him  without 
knowledge  or  consent,  and  on  her  complaining  of  that  formal 
lodgement,  he  soothed  her  by  the  assurance  that  it  was  best, 
and  that  her  title  should  be  secured;  fourth,  that  he  forthwith 
put  her  into  the  exclusive  possession  of  the  land  as  her  home, 


304  FARIS   v.  DUNN, 


and  that  he  and  the  family  and  neighbors  ever  afterward  recog- 
nized it  as  hers. 

On  these  facts,  did  not  a  trust  result  to  her  use  more  cer- 
tainly than  it  would  have  done  had  he  merely,  for  his  wife's 
relinquishment  of  dower  alone,  executed  a  covenant  to  do  what 
lie  afterward  faithfully  did?  And  did  not  the  consideration  for 
the  conveyance  to  her  father  proceed,  therefore,  as  much  from 
her  as  it  icould  have  done  had  it  been  paid  by  her  own  hands  f 
The  consideration  from  her  on  her  account,  and  the  title  made  to 
her  father,  nothing  else  appearing,  implied  a  resulting  trust,  ac- 
cording to  abundant  authority  not  now  controverted  or  doubted 
by  scientific  jurists;  and  such  trusts,  being  excepted  from  tlie 
operation  of  the  statute  of  frauds,  may  be  established  by  oral 
-testimony  as  satisfactorily  as  by  written  evidence.  On  this  sub- 
ject we  will  only  refer  to  Story's  Equity,  and^to  Chancellor 
KENT'S  opinion  in  the  case  of  Boyd  v.  ]\P  Clean,  \  Johnson's 
Ch.  583,  in  which  the  Chancellor  defines  the  principle  of  such 
trusts,  and  illustrates  it  by  a  collation  of  the  leading  cases  ab 
ovo.  And  the  trust  enforced  by  him  in  that  case  was  not  as 
conclusively  established  as  that  which  we  recognize  and  uphold 
in  this  case. 

2.  The  foundation  being  thus  fixed,  the  superstructure  is 
assaulted  in  the  impotent  form  of  estoppels,  never  pleaded  in 
this  entire  suit,  and  of  course  never  litigated.  And  the  first  of 
these,  intimated  for  the  first  time  in  the  petitions,  is  Eliza's 
qualification  as  executrix.  Though  she  never  acted,  yet  her 
qualifying  alone  is  urged  as  an  election  to  give  up  her  right  to 
her  home.  The  idea  of  such  an  elective  estoppel  is  a  gross 
perversion  of  the  principle  of  binding  election,  which  is,  that  a 
devisee  can  not  claim  under  and  against  the  same  will;  and 
that,  before  a  devisee  can  be  required  to  make  an  election,  the 
will  must  clearly  show  that  the  testator  so  intended.  No  such 
case  is  presented  by  the  will  of  William  Hoskins,  nor  did  he  so 
intend.  He  did  not  even  devise  Eliza's  land  at  all. 

In  chapter  30,  on  Election,  2d  volume  on  Equity  Jurispru- 
dence, Mr.  STORY,  after  defining  the  principle,  says,  section 
1075:  "  EC  cry  case  of  election  therefore  supposes  a  plurality  of 
gifts  or  rights,  tcith  an  intention,  express  or  implied,  of  the  party 
who  has  a  right  to  control  one  or  both,  that  one  should  be  a 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  305 

SUBSTITUTE  for  the  other."  Then,  illustrating  the  peculiar  diffi- 
culty of  making  a  clear  case  of  election,  he  says,  section  1086: 
"It  may  be  stated  that,  in  order  to  raise  a  case  of  election, 
there  must  be  a  char  intention  expressed  on  the  part  of  the 
testator  to  give  that  which  is  not  his  property.  A  mere  recital 
in  a  will  that  A  is  entitled  to  certain  property,  but  not  declaring 
the  intention  of  the  testator  to  give  it  to  him,  would  not  be  a 
sufficient  demonstration  of  his  intention  to  raise  an  election." 
Again,-  speaking  of  a  bar  to  a  wife's  dower  by  a  testamentary 
provision  for  her,  he  says,  section  1088,  that  ''such  an  intention 
must  be  dear  and  free  from  ambiguity  ;  and  it  could  not  be  in- 
ferred from  the  mere  fact  of  the  testator's  making  a  general 
disposition  of  his  property,  although  he  should  give  his  wife  a 
legacy."  And,  speaking  of  the  presumption  of  an  actual  elec- 
tion, he  says,  section  1098:  "Before  any  such  presumption  can 
arise,  it  is  necessary  to  show  that  the  party  acquiescing  or  acting 
Avas  cognisant  of  his  rights  ;  and  when  this  is  ascertained  affir- 
matively, it  may  be  further  necessary  to  consider  whether  the 
party  intended  an  election" 

Tested  by  these  established  rules,  there  can  be  no  rational 
doubt  that  there  is  nothing  having  the  semblance  of  election  in 
this  case.  Not  only  did  the  will  not  devise  her  home — unless  to 
herself  as  residuary  devisee — but  its  recital  only  that  his  debts 
were  secured  by  mortgage  does  not  allude  to  her  land,  or  even 
intimate  an  expectation  that  a  foreclosure  would  touch  it.  And 
it  is  almost  certain  that,  when  the  will  was  proved,  she  did  not 
know  that  her  land  was  included  in  the  mortgage ;  and  it  is  clear 
that  there  can  be  no  presumption  of  actual  election.  She  never 
accepted  or  claimed  any  thing  under  the  will,  but  cleaved  to  her 
land  all  the  time;  and  not  only  was  there  no  cause  for  election, 
but  it  is  evident  that  she  did  not  so  understand.  It  is  equally 
clear  that  she  was,  if  even  bound  to  elect,  neither  cognizant  of 
her  rights  nor  intended  to  elect  to  give  up  her  home.  The  con- 
trary is  demonstrated  by  her  conduct. 

The  next  pretense  of  estoppel  is,  her  bidding  for  the  land 
and  giving  her  bonds  for  the  price  bid.  Had  this  been  pleaded 
as  an  estoppel,  she  might  have  avoided  its  effect  by  sufficient 
proofs  and  explanations  ;  but,  not  being  pleaded,  that  question 
was  not  litigated.  This  shows  the  reason  why  an  estoppel  must 

20 


BOG  FARTS   v.  DUNN, 


be  pleaded  before    it  can  operate    as    such.     But    had   it  been 
pleaded,  it  would  have  been  unavailing. 

The  decree  of  sale  has  been  reversed  by  this  Court,  and  is 
vet  dead ;  and  the  reason  why  the  sale  also  was  not  set  aside, 
vas  that  Mrs.  Faris  had  not  asked  it,  and  as  purchaser  might 
tot  need  or  desire  it.  Then  she  asserted  her  rights  under  the 
esuUing  trust  to  avoid  her  obligation  as  bidtler,  and  confined 
.he  litigation  to  the  question  whether  she  was  liable  for  the  price 
bid  for  her  own  land,  which  the  mortgagees,  procuring  the  mort- 
gage with  full  notice  of  her  equity,  and  against  the  free  consent 
of  the  mortgagor,  had  no  right  to  sell.  This  was  permissible 
and  proper,  especially  as  the  reversal  of  the  decree  for  sale  left 
nothing  behind  except  the  question  of  enforceability  of  her 
bonds  given  for  her  own  property,  and  therefore  for  no  valuable 
or  binding  consideration.  The  reasons  why  shejbid  at  the  sale, 
and  gave  her  bonds,  are  sufficiently  explained  in  the  opinion ; 
and  certainly  she  did  not  intend  thereby  to  waive  her  claim  to 
the  land  as  owner,  but  bid  only  to  secure  her  title  from  disturb- 
ance. Nor  were  the  mortgagees  prejudiced  by  her  conduct. 
They  knew  that  they  were  wrongfully  selling  her  land  against 
her  will ;  and  had  it  even  been  sold  to  a  stranger  without  notice 
of  her  right,  if  the  sale  as  well  as  the  decree  for  it  had  not  been 
set  aside,  she  would  have  certainly  been  entitled  to  reclamation 
against  the  mortgagees.  We  can  not  see,  therefore,  how  her 
conduct  in  this  respect  would  have  forfeited  any  right  for  which 
she  was  still  struggling  openly,  perseveringly,  and  confidently. 

Then  the  trust  being  established,  notice  of  it  to  the  mort- 
gagees when  by  evident  misconception  or  coercion  they  improp- 
erly obtained  the  mortgage,  the  want  of  any  proof  of  a  waiver 
of  her  title,  or  of  any  estoppel  against  the  assertion  of  it,  and 
her  non-liability  for  the  price  bid  by  her  at  the  empty  sale, 
should,  as  we  adjudged,  close  the  litigation  so  far  as  Mrs.  Faris 
is  concerned.  Nothing  more  remains  for  litigation  against  her; 
and  therefore  we  decided  that  the  petition  against  her  should  be 
dismissed,  and  that  the  legal  title  to  her  land  should  be  conveyed 
to  her ;  and  by  this  we  will  stand. 

But  as  the  mortgage  debt  does  not  appear  to  have  been  fully- 
paid,  and  the  mortgagor's  estate  may  alone  be  liable  for  it,  we 
authorized  a  transformed  litigation  between  the  executor,  mort- 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  307 

gagees,  and  W.  A.  Hoskins,  with  whom,  as  an  alleged  debtor 
of  the  mortgagor,  she  has  been  interpleading  for  the  purpose  of 
compelling  him  to  pay  the  debt;  and  this  subrogation  and 
transposition  is  the  best  wo  can  do  for  all  parties  to  prevent 
multiplicity  and  injustice.  But  of  this  modification  the  counsel 
of  W.  A.  Hoskins  complains.  Up  to  this  stage  of  the  conflict 
both  of  the  petitioners  were  concurrent ;  but  here  they  diverge 
and  become  antagonistic.  This  is  just  what  we  expected. 

But  why  should  W.  A.  Hoskins  object  to  a  continuation  of 
the  litigation  in  this  modified  form  ?  It  can  not  hurt  him ;  nor 
can  it  be  material  to  his  interests,  as  now  involved,  Avhether  his 
sister  or  the  mortgagees  are  his  antagonists ;  nor  should  he 
complain  that  our  judgment  leaves  him  on  the  bond  after  exon- 
erating her.  He  has  not  denied  her  allegation  that  he  advised 
her  to  buy  the  land,  promised  to  be  her  surety,  and  to  stand 
between  her  and  the  debts  so  incurred.  Then,  as  between  her 
and  him,  he  now  appears  to  stand  in  equity  as  the  principal 
obligor;  and,  therefore,  discharging  her  does  not  release  him,  un- 
less the  mortgagees  shall  fail  to  establish  his  alleged  and  prima 
facie  indebtedness  to  the  mortgagor.  Holding  him  alone  on  the 
bonds  is  only  precautionary,  and  can  not  increase  his  ultimate 
liability.  If  it  shall  finally  appear  that  when  he  signed  the 
bonds  he  owed  the  mortgagor  nothing,  then  he,  too,  should  be 
released  from  the  obligation,  as  without  consideration  as  to  him 
any  more  than  as  to  Mrs.  Faris,  and  the  mortgagees  must  stand 
as  they  would  have  stood  if  the  mortgage  had  not  included  the 
land.  All  they  can  be  entitled  to  beyond  that  limit,  they  must 
get  from  him,  to  the  extent  of  his  liability  to  his  father.  The 
litigation  on  this  question,  as  commenced  by  Mrs.  Faris,  will 
only  be  continued,  and  so  the  opinion  intends.  He  may  make 
any  defense  against  the  mortgagees  and  the  mortgagor's  execu- 
tor which  he  could  make  against  the  mortgagor  himself,  were  he 
living  and  a  party  complaining.  We  are  not  inclined,  therefore, 
to  change  the  opinion  in  this  branch  of  the  case.  Justice  seems 
to  require  this  ulterior  litigation  in  this  form. 

And  now  we  will  only  add  that,  having  already  heard  all 
that  could  be  expected  from  a  reargument,  and  understanding 
the  case  as  thoroughly  as  we  could  hope  ever  to  understand 
it  in  all  its  phases,  we  deem  it  not  only  useless  but  unjust 


308  FARIS  v.  DUNN, 


further  to  prolong  this  litigation    in   this    Court  by  granting  a 
rehearing. 

Wherefore  both  petitions  for  a  rehearing  are  unanimously 
overruled  (a). 

(a)  WHERE  A  RESULTING  TRUST  DOES  ARISE. — Miller  and  \Vife  v.  Edwards, 
1  Bush,  394:  To  reinvest  in  a  more  desirable  farm  in  Shelby  County,  the  wife 
concurred  with  her  husband  in  selling  her  Henry  County  land,  and  purchased 
the  Shelby  farm  with  the  proceeds,  on  the  express  condition  that  the  title  should  be 
secured  to  her  separate  use.  Without  her  knowledge  or  consent,  the  legal  title  to 
the  Shelby  farm,  for  reasons  consistent  with  his  integrity,  was  conveyed  to  the 
husband.  When,  some  time  afterward,  she  discovered  the  apparent,  condition  of 
the  title,  she  concurred  in  the  sale  of  the  Shelby  farm,  and  a  reinvestment  of  a 
portion  of  the  proceeds  in  a  smaller  place,  to  be  secured  to  her  as  the  other  was 
to  have  been;  but,  without  her  knowledge  or  consent,  the  title  was  again  conveyed 
to  the  husband,  for  reasons  consistent  with  his  honor.  Discovering  this  error, 
she  agreed  to  sell  the  smaller  place  for  $14,000,  on  the  express  condition  that 
the  notes  for  $12,000  of  the  purchase  price  should  be  made  ""pay  able  to  him  for 
her  separate  use,  and  deposited  with  a  stranger  to  keep  for  her.  These  notes 
•were  attached  by  creditors  of  her  husband.  Held:  1.  That  such  a  contract  as 
that  made  with  her  husband  before  her  land  was  sold,  is  valid  and  enforceable 
as  between  the  parties  to  it.  2.  That  even  without  any  explicit  stipulation,  au 
available  trust  resulted  by  implication,  unaffected  by  the  statute  of  frauds  or  of 
conveyances.  3.  That,  the  trust  is  not  affected  by  the  Revised  Statutes,  sec.  20, 
ch.  80,  2  Stanton,  230,  because  the  title  was  conveyed  to  her  husband  against  her 
will,  and  in  violation  of  fiducial  faith.  [See  note  to  Paris  v.  Dunn,  page  300,  for 
the  provisions  of  the  statute  referred  to.]  4.  That  there  is  no  ground  to  presume 
that  the  husband  ever  intended  to  convert  the  wife's  estate,  or  its  proceeds,  to 
his  own  use.  As  between  themselves,  therefore,  all  that  remains  is  equitably  as 
much  hers  as  ever  it  was.  5.  That  before  they  became  creditors,  the  attaching 
creditors  had  constructive  notice  of  her  rights,  and  a  court,  of  equity  should  not 
help  them  to  divest  her  of  this  payment  of  her  inheritance.  In  this  case,  with 
money  given  to  her  for  her  separate  use,  the  wife  purchased  furniture  in  her 
own  name,  which  was  recognized  by  her  husband  as  her  own  exclusive  property. 
The  furniture  being  attached  by  the  husband's  creditors, — held:  1.  That  though 
ostensibly  in  the  husband's  possession,  and  therefore  technically  his  properly, 
the  furniture  was  nevertheless,  and  yet  is,  beneficially  hers.  2.  That  no  written 
memorial  or  registration  in  such  a  case  is  required  by  law.  3.  That  though  a 
purchaser  from  the  husband  without,  notice  might  have  been  entitled  to  hold, 
yet,  4.  That  a  mere  creditor  can  not  prevail  against  a  wife's  clear  equity,  citing 
J/'  Cl'iiiiKilian  v.  JJftislfy,  17  B.  Monroe,  111. 

Starr  v.  Wright,  20  Ohio  State,  07:  A  father,  to  avoid  creditors,  conveyed  to 
n  minor  son.  Afterward,  to  enable  the  father  to  sell,  he  reconveyed,  and  the 
property  was  sold  to  ft  bona  fide  purchaser.  The  son,  after  becoming  of  age,  sued. 
Held:  the  son  held  in  trust,  and  could  have  been  compelled  to  reconvey,  and 
could  not,  under  the  circumstances,  disaffirm  his  reconveyance  so  as  to  defeat 
the  title  conveyed  by  the  father. 

Campbell  v.  Corlfy,  1  De  Gex  and  Jones,  238:  An  elderly  lady  married  a 
barrister  who  had  for  some  years  been  her  confidential  friend  and  adviser. 


IN  THE  KENTUCKY  COURT  OF  APPEALS, 

Before  the  marriage  a  lengthened  correspondence  took  place  between  them,  in 
which  she  insisted  that  her  personal  estate  should  be  settled  so  as  to  be  "hers 
as  if  unmarried,1'  and  hers  "to  give,  to  use,  and  to  will."  He  assented  to  this, 
and  undertook  to  prepare  the  settlement.  By  the  marriage  he  acquired,  under 
her  father's  will,  a  life  interest,  expectant  on  her  decease,  a  considerable  sum  of 
stock.  Held,  that  having  undertaken  to  prepare  the  settlement,  he  was  bound  to 
prepare  such  a  one  as  under  the  circumstances  a  conveyancer  would  have  drawn 
or  the  court  would  have  sanctioned ;  that  such  a  settlement  would  have  given 
him  no  interest  in  her  absolute  property  in  default  of  appointment  by  her;  and 
that,  she  having  died  without  making  any  disposition  in  his  favor,  he  was  a 
trustee  of  her  personal  estate  for  her  next  of  kin. 

WHERE  A  RESULTING  TRUST  DOES  NOT  ARISE. — "To  establish  an  express 
trust  by  a  deed  absolute  on  its  face,  it  is  requisite  that  the  evidence  should  be 
clear,  certain,  and  conclusive,  in  proof,  not  only  of  the  existence  of  the  trust,  and 
that  too  at  the  time  of  the  conveyance,  but  also  as  to  its  terms  and  conditions," 
Miller  v.  Slokely,  5  Ohio  State,  194.  "It  is  not  sufficient  that  circumstances 
should  be  in  proof  calculated  to  excite  a  suspicion,  or  even  a  probability,  in  the 
minds  of  some  persons,  that  there  might  have  been  a  trust;  but  the  proof  must 
show  the  existence  of  the  trust  affirmatively,  and  so  conclusively  as  to  remove  all 
reasonable  and  well-founded  doubts."  "A  deed  for  the  conveyance  of  lands, 
absolute  in  its  terms,  and  in  consideration  of  love  and  affection,  is  repugnant  to 
the  existence  of  a  trust;  and  if  in  opposition  to  the  terms  of  such  a  deed,  an 
express  trust,  coupled  with  an  interest,  could  be  set  up  and  proved  by  circumstan- 
tial evidence,  predicated  on  a  supposed  concealment  or  fraud,  after  the  lapse  of 
thirty  years,  it  is  essential  that  the  evidence  be  so  certain  and  conclusive  as  to  ex- 
clude every  rational  hypothesis  to  the  contrary,  with  the  certainty  of  a  positive 
declaration  of  the  trust,"  Ib.  194.  "An  implied  or  resulting  trust  can  not  be 
shown  against  an  absolute  deed  in  consideration  of  natural  love  and  affection, 
in  writing,"  Ib.  192. 

In  a  deed  of  conveyance  to  a  son-in-law,  the  consideration  stated  was  his 
marriage,  and  "natural  love  and  affection"  of  the  grantor  for  his  daughter  and 
the  grantee;  and  the  purpose  expressed  in  the  deed,  was  to  advance  the  grantee 
in  life.  Held,  that  no  trust  in  the  estate  conveyed  arose  in  favor  of  the  daughter, 
Thompson  v.  Thompson,  18  Ohio  State,  73. 

An  antenuptial  contract  was  entered  into,  whereby  the  husband  was  ap- 
pointed trustee  of  real  and  personal  property,  and  as  such  trustee  was  to  have 
the  entire  and  sole  management,  direction,  and  control  thereof,  but  it  was  silent 
as  to  the  persons  to  be  beneficially  interested  in  the  trust.  Held,  that  no  trust  was 
constituted  which  the  court  could  execute;  and  that  it  seems,  that  when  the  instru- 
ment creating  the  trust  does  not  disclose  the  beneficiary,  it  does  not  necessarily 
result  that  the  creator  of  the  trust  is  such  beneficiary,  Dillaye  v.  Greenough,  45 
New  York,  45. 


310  —        ,  WALKER  v.  WALKER, 


WALKER  v.  WALKER'S  EXECUTOR. 

[Decided  in  the  Supreme  Court  of  the  United  States,  at  its  December 
term,  1869,  Associate  Justice  DAVID  DAVIS  delivering  the  opinion.  The 
Court  -was  composed  of  Chief  Justice  SALMON  P.  CHASE,  and  Associates 
SAMUEL  NELSON,  NOAH  H.  SWAYNE,  DAVID  DAVIS,  WILLIAM  STRONG, 
NATHAN  CLIFFORD,  SAMUEL  F.  MILLER,  STEPHEN  J.  FIELD,  and  JOSEPH 
BRADLEY.  Reported  in  9  Wallace,  743.] 

A  covenant  by  a  husband  for  the  maintenance  of  the  wife,  contained  in  a  deed 
of  separation  between  them,  through  the  medium  of  trustees,  where  the  con- 
sideration is  apparent,  must  now  be  regarded  on  authority  as  valid,  not- 
withstanding the  serious  objections  to  such  deeds.  It  will  accordingly  be 
enforced  in  equity,  if  it  appear  that  the  deed  was  not  made  in  contemplation 
of  a  future  possible  separation,  but  in  respect  to  one  which  was  to  occur 
immediately,  or  for  the  continuance  of  one  that  had  already  taken  place. 
And  this  especially  if  the  separation  was  occasioned  by  the  misconduct  of 
the  husband,  and  the  provision  for  the  wife's  support  was  reasonable  under 
the  circumstances,  and  no  more  than  a  court  before  which  she  was  entitled 
to  carry  her  grievances  would  have  decreed  to  her  as  alimony. 

The  validity  of  such  a  covenant  is  not  impaired  by  the  fact  that  the  deed  con- 
tains a  provision  that,  if  the  parties  should  afterward  come  together,  the 
trust  should  remain  and  be  executed  in  like  manner  as  if  they  should  re- 
main separate. 

A  husband  may  be  chargeable  as  trustee  with  the  income  of  his  wife's  separate 
property,  and  if  he  have  received  it  from  her  to  invest  it  for  her.  and  have 
not  invested  it,  he  will  be  so  charged  at  her  suit,  whether  the  income  be  of 
property  which  he  has  settled  upon  her,  or  be  income  from  some  other  sep- 
arate property  of  hers. 

The  Federal  courts,  where  they  have  jurisdiction,  will  enforce,  for  the  further- 
ance of  justice,  the  same  rules  in  the  adjustment  of  claims  against  ancillary 
executors,  that  the  local  courts  would  do  in  favor  of  their  own  citizens. 

A  widow,  by  being  a  mere  formal  party  to  a  deed  of  compromise  between  the 
heirs-at-law  of  a  decedent  and  his  residuary  devisees,  by  which  a  specific  sum 
is  piven  to  the  former  and  the  residue  of  the  estate  to  the  latter,  does  not 
estop  herself  from  coming  upon  the  estate  with  a  claim  for  separate  moneys 
of  hers,  received  by  her  husband  to  invest,  for  her,  but  which  he  did  not  so 
invest;  she  having  done  nothing  to  conceal  her  claim  from  the  residuary 
devisees,  and  the  "residue"  which  the  heirs  surrendered  having  been  a 
residue  after  the  proper  settlement  of  the  estate. 

Kor  docs  she  estop  herself  from  asserting  such  a  claim  against  her  husband's 
executors,  by  her  acceptance  of  a  provision  under  his  will  which  makes  a 
limited  provision  for  her,  to  be  received,  with  income  under  a  certain  trust 
deed,  in  satisfaction  of  dower. 

The  view  of  the  court  below  upon  an  ancient  item  of  account,  somewhat  obscure, 
and  where  there  was  but  little  evidence,  not  disturbed. 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  311 

The  estate  of  a  husband,  who  had  maltreated  his  wife,  and  obtained  from  her  the 
income  of  her  separate  property  under  a  promise  to  invest  it  for  her,  but  who 
did  not  so  invest  it,  charged  after  his  death  with  interest,  compounded  annu- 
ally, through  a  long  term  of  years,  and  deprived  of  all  commissions  for 
services  as  trustee. 

APPEAL  from  the  Circuit  Court  for  the  District  of  Massa- 
chusetts. The  case  was  this : 

In  September,  1845,  Dr.  William  Walker,  then  a  citizen  of 
Charlestown,  Massachusetts,  without  cause,  compelled  his  wife 
and  two  of  their  children  to  leave  his  house.  Before  this  time 
he  had  treated  his  wife  with  great  harshness  and  cruelty,  pro- 
ceeding so  far  as  to  inflict  personal  violence  upon  her.  This 
conduct  entitled  his  wife,  by  the  laws  of  Massachusetts,  to  a  de- 
cree of  divorce  from  bed  and  board,  and  for  a  proper  allowance 
of  alimony ;  and,  with  a  view  to  obtain  these,  she  applied  to 
counsel  to  take  legal  proceedings  against  her  husband.  On 
learning  this,  Dr.  Walker  sought  the  advice  of  his  friend,  Uriel 
Crocker,  and  requested  him  to  confer  with  a  lawyer  on  the 
subject.  This  friendly  service  was  performed  by  Mr,  Crocker, 
and  the  conference  resulted  in  recommending  the  husband  to 
settle  on  his  wife  $50,000,  and  that  articles  of  separation  between 
them  be  executed.  It  was  considered  that  the  sum  agreed  on 
was  a  suitable  settlement  under  the  circumstances,  as  nearly  the 
same  amount  had  been  obtained  by  Dr.  Walker  from  the  estate 
of  his  wife's  father,  and  as  Dr.  Walker  was,  independently  of 
this,  a  person  of  fortune ;  his  estate  at  the  time  having  been 
between  three  and  four  hundred  thousand  dollars. 

The  parties  adopted  the  recommendation  of  Mr.  Crocker  and 
his  conferee,  and  on  that  basis  the  articles  of  separation  were 
drawn  up  and  executed.  By  these  articles  Dr.  Walker  trans- 
ferred to  trustees,  in  trust  for  his  wife,  the  amount  of  property 
agreed  upon,  and  directed  the  income  to  be  paid  to  her  during 
her  life.  This  transfer  was,  however,  on  the  express  condition 
that  Mrs.  Walker  should  release  her  possibility  of  dower,  when 
asked  to  do  so,  to  all  the  real  estate  which  he  should  sell  during 
his  life-time,  and  if  she  survived  him,  that  she  should  release 
her  right  of  dower  to  the  entire  estate.  The  trustees,  on  their 
part,  covenanted  to  indemnify  the  husband  from  all  payment  of 
alimony  thereafter,  and  the  deed  contained  a  stipulation  that  if 
the  parties  should  afterward  come  together,  the  trust  should 


312  WALKER  v.  WALKER, 

remain,  and  be  executed  in  like  manner  as  if  they  should  live 
separate. 

The  parties  continued  to  live  apart,  after  the  execution  of 
these  articles,  until  the  month  of  April,  1846,  when  Mrs.  Walker 
returned  to  her  husband  at  his  request,  and  again  for  a  certain 
time  lived  with  him. 

The  main  controversy  in  this  case  grew  out  of  transactions 
which  occurred  after  Mrs.  Walker  thus  returned  to  her  hus- 
band's home. 

The  money  was  admitted  to  have  been  always  paid  by  the 
trustees  into  Mrs.  Walker's  own  hands.  And  that  in  September, 
1846,  when  the  first  payment  after  her  return  to  her  husband's 
house  was  due  under  the  deed  of  trust,  Dr.  Walker  went  to  Mr. 
Crocker,  the  managing  trustee,  with  an  order  for  the  money  from 
his  wife,  and  stated  that  she  had  agreed  that  he  should  invest  the 
amount  for  her,  with  the  sum  of  one  thousand  dollars  previously 
paid  to  her  at  Crocker's  request. 

[The  receipt  by  Dr.  Walker  of  the  subsequent  payments,  upon  the  agreement 
to  invest  the  same  for  his  wife,  were  proved  by  Miss  Emily  Walker,  a  daughter.] 

At  another  time — having  previously  requested  Crocker  to 
defer  the  payment  of  a  sum  of  money  then  due  to  his  wife,  on 
account  of  his  apprehension  that  she  would  be  unwilling  to  have 
it  invested  for  her,  as  he  wished  to  do — he  desired  Crocker  to 
go  to  his  house  and  pay  his  wife  the  money,  as  he  had  a  good 
chance  to  invest  it.  In  fact,  the  whole  evidence  made  it  clear 
that  Dr.  Walker  received  the  income  of  his  wife's  estate  from 
her  hands  on  the  condition  that  he  would  invest  it,  as  received, 
for  her  benefit,  and  that  he  agreed  to  this  condition. 

Mrs.  Walker  lived  with  her  husband  until  June,  1 860,  when 
she  again  abandoned  his  house  on  account  of  his  cruel  treatment 
of  herself  and  their  daughters,  and  remained  away  from  him 
during  the  residue  of  his  life. 

After  the  separation  in  June,  1860,  Dr.  Walker  went  to  re- 
side in  Newport,  R.  I.,  and  died  there  in  1865,  leaving  more 
than  a  million  of  dollars  of  estate,  and  a  will,  which,  after  set- 
ting aside  $180,000  in  trust,  to  secure  from  the  income  to  his 
wife,  with  the  rents  of  the  $50,000,  settled  in  1846,  an  annual 
income  of  $3,000 ;  and  to  his  children  the  remaining  income ; 
and  after  various  legacies,  including  that  of  most  of  his  silver- 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  313 

plate  between  his  wife  and  daughters,  left  the  residue  of  his 
estate  to  literary  and  scientific  institutions.  The  provision 
made  by  his  will  for  his  wife  was  declared  by  the  will  to  be  "in 
full  and  in  lieu  of  her  dower." 

Letters  testamentary  were  granted  on  Dr.  Walker's  estate  in 
Rhode  Island ;  but  letters  ancillary  were  also  granted  in  Massa- 
chusetts, where  he  had  a  large  amount  of  personal  property  as 
well  as  in  Rhode  Island. 

The  granting  of  letters  testamentary  upon  Dr.  Walker's  es- 
tate was  opposed  by  his  heirs-at  law,  and  after  the  grant  of  the 
letters,  they  threatening  to  seek  to  have  them  vacated,  a  com- 
promise was  effected,  and  a  deed  executed  accordingly,  between 
the  heirs  and  the  residuary  devisees,  by  which  the  former  re- 
leased to  the  latter,  after  the  payment  to  themselves  of  a  con- 
siderable sum  of  money,  the  residue  of  the  estate,  after  payment 
of  all  debts  and  just  claims  upon  it.  Mrs.  Walker  was  a  formal 
party  to  this  deed. 

Mrs.  Walker  now,  October  term,  18G5,  filed  a  bill  against 
her  husband's  executors,  alleging  a  trust  or  investment  as  re- 
spected the  moneys  which  she  had  paid  into  his  hands,  and 
calling  for  an  account. 

The  executors,  either  by  the  answer  or  in  the  argument,  set 
up  as  defenses  to  the  bill: 

1.  That  the  original  article  of  separation,  having  been  a  vol- 
tintary  agreement  of  husband  and  wife  to  live  separately,  was 
invalid ;  and  the  trust  created  by  it  of  course  invalid  also ;   that 
this  especially  was  so  as  the  -  instrument  was   construed   by  the 
other  side,  for  that  this  construction  made  it  his  interest  to  op- 
pose  his  wife's   return   to  his  house,  since  he  would  have  then 
both  to  support   her   and  to  let  her  have  the   separate  income 
also. 

2.  That  as  to  the  sums  received  from  his  wife,  equity  would 
not  make  Dr.  Walker  a  trustee  for  her ;  that,  if  he  could  prop- 
erly be  a  trustee  at  any  time,  yet  that  during  the   cohabitation 
of  the  parties  the  trust  was  suspended ;  moreover,  that  the  evi- 
dence was   insufficient   to   show  any  intention  to  make  himself 
such  trustee  in  fact ;   the  bill  not  being  filed  until  twenty  years 
after  the  alleged  promises  were  made,  and  the  evidence  to  sup- 
port it  being  chiefly  that  of  the  daughter,  a  witness  naturally 


314  WALKER  v.  WALKER, 

inclined  to  the  mother's  side,  and  whose  statements  were  largely 
colored  by  her  opinions  and  feelings. 

3.  That   Dr.   Walker  having  died  in  Rhode  Island,  and  his 
will    having   been    proved    there,    this    suit    should    have    been 
brought  there,  and  not  in  Massachusetts,  where  it  was  brought. 

4.  That  Mrs,  Walker,  having  been   a  party 'to  the  deed  of 
compromise,  was  estopped  from  bringing  this  suit. 

5.  That   by  accepting   the  provisions  of  her  husband's  will, 
she  had  waived  all  right  to  maintain  a  suit  like  the  present  one. 

The  court  below  sustained  the  bill ;  held  Dr.  Walker  a 
trustee  to  invest  for  his  wife  the  income  of  the  settled  property 
received  by  him  from  her;  and  referred  the  case  to  a  master 
for  an  account.  The  master  charged  Dr.  Walker's  estate  ac- 
cordingly, charging  him  also  interest  compounded  annually,  but 
allowed  him  commissions  as  trustee,  $1,682.38.  He  also  allowed 
his  estate  a  credit  of  $2,400. 

The  Circuit  Court  affirmed  this  report,  giving  Mrs.  Walker 
a  decree  for  $81,750.85;  and  Mrs.  Walker  appealed,  asserting, 
among  other  things,  that  not  only  was  Dr.  Walker  entitled  to 
no  commissions  as  trustee,  but  that  his  conduct  was  such  as  de- 
served severe  treatment,  and  that  interest  ought  to  have  been 
compounded  semi-annually. 

Messrs.  Sidney  Bartlett  and  J?.  R.  Curtis,  for  appellant. 
Messrs.  Thomas  and  Hutchins,  for  appellees.  The  additional 
point  being  made  in  this  Court  in  behalf  of  Dr.  Walker's  estate, 
that  under  the  General  Laws  of  Massachusetts,  ch.  97,  sec.  16', 
the  executors  were  not  liable  to  this  suit,  because  it  wras  begun 
within  one  year  after  they  gave  bonds. 

Mr.  Justice  DAVIS  delivered  the  opinion  of  the  Court :  The 
bill  here  seeks  to  charge  the  estate  of  Dr.  Walker,  in  the  hands 
of  his  executors,  with  a  trust  in  favor  of  his  widow.  The  court 
below  found  that  the  trust  existed  and  was  valid,  and  this  appeal 
seeks  to  review  that  decision  as  erroneous. 

Two  principal  questions  are  presented  for  consideration: 

1.  Is"  the  trust  created  by  the  articles  of  separation  in  this 
case  valid,  and  will  a  court  of  equity  enforce  it  ? 

2.  Can  a  husband  be  a  trustee  for  his  wife  ?    and  if  so,  did 
Dr.  Walker  constitute  himself  such  a  trustee  or  not  ? 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  315 

It  is  contended  that  deeds  of  separation  between  husband 
and  wife  can  not  be  upheld,  because  it  is  against  public  policy 
to  allow  parties  sustaining  that  relation  to  vary  their  duties 
and  responsibilities  by  entering  into  an  agreement  which  con- 
templates^ partial  dissolution  of  the  marriage  contract.  If  the 
question  were  before  us,  unaffected  by  decision,  it  would  present 
difficulties,  for  it  can  not  be  doubted  that  there  are  serious  ob- 
jections to  voluntary  separations  between  married  persons.  But 
contracts  of  this  nature,  for  the  separate  maintenance  of  the 
wife,  through  the  intervention  of  a  trustee,  have  received  the 
sanction  of  the  courts  in  England  and  in  this  country  for  so  long 
a  period  of  time,  that  the  law  on  the  subject  must  be  considered 
as  settled  (a). 

It  is  true  that  different  judges,  in  discussing  the  question, 
have  struggled  against  maintaining  the  principle ;  but  while  do- 
ing so  they  have  not  felt  themselves  at  liberty  to  disregard  it, 
on  account  of  the  great  weight  of  authority  with  which  it  was 
supported,  and  have,  therefore,  uniformly  adhered  to  it.  It  is 
unnecessary  to  consider  whether  the  extent  to  which  the  doctrine 
has  been  carried  meets  our  approbation,  nor  are  we  required  to 
discuss  the  subject  in  any  aspect  which  this  case  does  not  pre- 
sent. It  is  enough  for  the  purposes  of  this  suit  to  say,  that  a 
covenant  by  the  husband  for  the  maintenance  of  the  wife,  con- 
tained in  a  deed  of  separation  between  them,  through  the  medium 
of  trustees,  where  the  consideration  is  apparent,  is  valid,  and 
will  be  enforced  in  equity,  if  it  appeal's  that  the  deed  was  not 
made  in  contemplation  of  a  future  possible  separation,  but  in 
respect  to  one  which  was  to  occur  immediately,  or  for  the  con- 
tinuance of  one  that  had  already  taken  place.  And  this  is  es- 
pecially true  if  the  separation  was  occasioned  by  the  misconduct 
of  the  husband,  and  the  provision  for  the  wife's  support  was 
reasonable  under  the  circumstances,  and  no  more  than  a  court, 

(a)  Compton  v.  Collinson,  2  Brown's  Ch.  377;  Worrall  v.  Jacob,  3  Merivale, 
266 ;  Jee  v.  Thurlow,  2  Barnewall  and  Creswell,  546 ;  Webster  v.  Webster,  1  Small 
and  Gif.  489;  S.  C.  23  English  Law  and  Equity,  216  ;  17  Id.  278;  Randle  v.  Gould, 
8  Ellis  and  Blackburne,  457;  Carson  v.  Murray,  3  Paige,  483 \* Nichols  v.  Palmer, 
5  Day,  47 ;  Hutton  v.  Duey,  3  Barr,  100 ;  Settle  v.  Wilson,  14  Ohio,  257 ;  Chapman 
v.  Gray,  8  Georgia,  341 ;  Reed  v.  Beazley,  1  Blackford,  97 ;  Wells  v.  Stout,  9  Cal- 
ifornia, 494;  Dellinger's  Appeal,  35  Pennsylvania,  357;  Gaines  v.  Poor,  3  Metcalfe 
(Ky.),  503;  Hunt  v.  Hunt,  judgment  by  Lord  WESTBURT  in  5  Law  Times,  778. 


316  WALKER  v.  WALKER, 

before  which  she  was  entitled  to  carry  her  grievances,  would 
have  decreed,  to  her  as  alimony.  In  this  state  of  the  law  on 
the  subject,  it  is  clear  the  deed  of  settlement  in  controversy  was 
unobjectionable.  It  is  equally  clear  that  the  separation  accom- 
plished by  it  was  the  best  thing  for  the  parties  at  the  time,  and 
that  it  ultimately  led  to  a  reunion  which  lasted  over  fourteen 
years.  The  evidence  shows  that  the  bad  conduct  of  Dr.  Walker 
to  his  wife  justified  her  in  leaving  him,  and  entitled  her  to  a 
legal  separation  at  the  hands  of  a  court,  with  alimony  in  propor- 
tion to  the  value  of  his  estate.  For  many  reasons,  which  are 
apparent  without  stating  them,  it  was  desirable,  if  possible,  to 
avoid  a  judicial  investigation;  and  accordingly  negotiations  to 
this  end  were  commenced  on  the  part  of  the  husband,  which  re- 
sulted in  securing  to  the  wife  a  suitable  provision  for  her  sup- 
port. This  settlement  was  made  by  him  and  accepted  by  her, 
not  only  in  lieu  of  alimony,  which  she  could  have  obtained,  but 
also  in  place  of  dower ;  and  the  covenant  of  the  trustees  against 
any  future  claim  of  alimony,  and  their  agreement  that  the  wife's 
debts  should  be  paid  out  of  the  property  conveyed  to  them,  fur- 
nished the  security  to  the  husband  for  the  permanent  arrange- 
ment contemplated  by  the  parties.  If  we  consider  that  the 
value  of  the  property  transferred  to  the  trustees  for  the  benefit 
of  the  wife  was  but  little  more  than  the  husband  received  in 
her  right  from  her  father's  estate,  and  that,  at  the  time,  he  was 
worth  between  three  and  four  hundred  thousand  dollars,  it  would 
seem  that  the  provision  for  the  wife's  maintenance  was  less  than 
she  had  a  right  to  demand  and  ought  to  have  received.  If  the 
law  authorizes  a  wife  to  leave  her  husband  on  account  of  cruel 
treatment,  and  to  get  from  him  a  competent  support,  it  can  not 
withhold  its  sanction  to  the  articles  of  separation  concluded  be- 
tween these  parties  under  the  circumstances  disclosed  by  the 
evidence  in  this  case.  It  is  insisted  that  the  obligation  of  the 
trust  was  discharged  when  the  wife  rettirned  to  her  husband's 
house,  but  this  is  a  mistaken  view  of  the  effect  of  the  instru- 
ment. It  was  the  intention  of  the  parties  that  the  arrangement 
should  be  permanent,  and  to  accomplish  that  purpose  the  agree- 
ment was  framed  so  that  the  wife  should  enjoy  her  separate  es- 
tate during  life,  although  she  should  subsequently  become  recon- 
ciled to  her  husband,  and  cohabit  with  him.  We  can  see  no 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  317 

valid  objection  to  such  a  provision,  and  it  is  certainly  supported 
by  authority  (a).  The  husband  had  a  right  to  make  a  settlement 
upon  his  wife  without  any  view  to  separation,  and  the  insertion 
of  this  provision  shows  that  he  did  not  intend  the  settlement  to 
cease  on  the  return  of  the  wife  to  cohabitation.  There  is  no 
good  reason  why  effect  should  not  be  given  to  the  intention  of 
the  parties  on  the  subject.  If,  on  the  grounds  of  public  policy, 
it  is  desirable  that  the  parties  should  be  reconciled,  whatever 
tends  to  promote  such  a  result  will  receive  the  favorable  consid- 
eration of  a  court  of  equity.  Without  this  provision  there  was 
no  inducement  for  Mrs.  Walker  to  return  to  her  husband ;  with 
it  she  could  try  to  live  with  him  again,  and  if  his  previous  bad 
treatment  was  repeated,  she  was  fortified  against  the  contin- 
gency of  being  turned  away  another  time  penniless.  There  was 
nothing  in  his  previous  conduct  to  inspire  her  with  confidence 
in  his  subsequent  good  behavior,  and  but  for  the  fact  that  the 
means  of  support  were  secured  to  her  in  case  her  life  became 
intolerable  with  him,  it  is  reasonable  to  infer  that  she  would 
never  have  ventured  to  cohabit  with  him  after  the  separation. 
It  is  clear,  then,  that  this  trust  was  operative  during  the  life  of 
the  wife,  and  that  a  court  of  equity  will  enforce  it. 

The  next  inquiry  relates  to  transactions  which  occurred  after 
the  wife  returned  to  her  husband  at  his  request,  and  on  which 
the  claim  for  relief  in  this  case  is  based.  That  a  husband  may 
be  a  trustee  for  his  wife,  and  can  be  compelled  in  equity  to  ac- 
count for  any  money  or  property  belonging  to  her  which  he  has 
received,  in  the  same  manner  that  a  stranger  would  be  held  to 
account,  is  a  doctrine  so  well  settled  that  it  requires  hardly  a 
citation  of  authorities  to  sustain  it  (J). 

It  makes  no  difference  whether  the  property  which  he  has  re- 
ceived was  settled  by  him  upon  his  wife,  or  came  to  her  through 
other  sources.  If  the  property  was  her  own  separate  and  exclu- 
sive estate,  and  he  has  agreed  to  become  her  trustee  respecting 
it,  his  liability  attaches,  and  he  will  be  charged  with  the  trust. 

| : 

(a)  Wilson  \.  Mushett,  3  Barnewall  and  Adolphus,  743 ;  Bell  on  Husband  and 
Wife,  525-541. 

(6)2  Kent.,  163,  and  cases  cited;  2  Story's  Equity,  sec.  1380;  Neves  v.  Scott, 
9  Howard,  212;  Woodward  v.  Woodward,  8  Law  Times,  N.  S.  749;  Grant  v.  Grant, 
12  Id.  721. 


318  WALKER  v.  WALKER, 

The  property  settled  upon  Mrs.  Walker  by  the  articles  of  sep- 
aration was  her  separate  estate,  and  to  be  enjoyed  by  her  in  the 
same  manner  as  if  it  had  been  conveyed  to  trustees  for  her 
benefit,  by  settlement  before  marriage.  The  income  secured  to 
her  was  not  suspended  by  her  returning  to  live  with  her  hus- 
band, on  his  solicitation,  nor  had  he  any  right  to  retain  it  by 
way  of  set-off  against  the  expense  of  her  living.  If  for  any 
cause  he  desired  the  state  of  separation  to  cease,  and  invited 
his  wife  to  return,  it  was  his  duty,  as  it  should  have  been  his 
pleasure,  out  of  his  abundant  means,  to  have  given  her  a  decent 
support.  What  is  the  evidence  touching  the  question  whether 
Dr.  Walker  constituted  himself  the  trustee  for  his  wife,  in  respect 
to  the  income  derived  from  her  separate  estate? 

It  is  clear  and  un contradicted,  that  Dr.  Walker  received  the 
rents  and  incomes  of  his  wife's  estate,  from  her,  en  the  condition, 
to  which  he  agreed,  that  he  would  invest  them  for  her  benefit  as 
they  were  received,  and  this  agreement  imposed  on  him  the 
character  of  a  trustee  as  to  this  property.  To  hold  otherwise 
would  be  to  sanction  the  grossest  fraud.  It  is  not  necessary  to 
create  the  trust,  that  the  husband  should  use  any  particular  form 
of  words,  nor  need  these  words  be  in  writing.  All  that  is  re- 
quired is,  that  language  should  have  been  employed  equivalent 
to  a  declaration  of  trust.  That  the  words  which  Dr.  Walker 
used  constituted  him  the  trustee  of  his  wife,  can  not  admit  of 
controversy.  An  attempt  is  made  to  discredit  the  principal 
witness,  by  whom  the  important  facts  in  this  case  are  proved, 
but  it  has  wholly  failed.  Her  narrative  of  the  occurrences 
which  led  to  the  separation,  and  of  the  transactions  out  of 
which  the  trust  arises,  is  intelligently  given,  does  not  vary  on 
Cross-examination,  and  bears  the  impress  of  truth. 

It  is  insisted  that  this  suit  should  have  been  brought  in 
Rhode  Island,  because  Dr.  Walker  had  his  domicil  in  that  state 
when  lie  died,  and  his  will  is  proved  there.  But  the  will  was 
also  proved  in  Massachusetts,  where  ancillary  administration  was 
obtained ;  and  if,  as  is  conceded  in  such  a  case,  the  assets  re- 
ceived and  inventoried  by  the  executors  there  are  liable  to  the 
claims  of  the  citizens  of  Massachusetts,  the  citizens  of  other 
States  will  be  placed  on  the  same  footing  in  this  respect,  in  the 
Federal  courts  sitting  in  Massachusetts,  where  there  is  no 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES.  319 

suggestion  of '  insolvency.  The  Circuit  Courts  of  the  United 
States,  with  full  equity  powers,  have  jurisdiction  over  executors 
and  administrators,  where  the  parties  are  citizens  of  different 
States,  and  will  enforce  the  same  rules  in  the  adjustment  of 
claims  against  them  that  the  local  courts  administer  in  favor 
of  their  own  citizens  (a). 

It  is  urged  that  Mrs.  Walker  is  estopped  from  setting  up 
this  claim,  because  she  was  a  party  to  the  indenture  of  com- 
promise. But  if  so,  'she  was  only  a  formal  party  to  it,  received 
nothing  under  it,  and  was  not  concerned  with  the  residue  of  the 
estate,  which  it  proposed  to  adjust  only  after  the  debts,  legacies, 
and  liabilities  were  paid.  Having  done  nothing  to  conceal  her 
claim,  nor  imposed  upon  the  parties  to  the  compromise  respect- 
ing it,  she  can  not  be  considered  as  having  waived  her  right  to 
prosecute  it. 

But  if  this  defense  is  overruled,  it  is  nevertheless  contended 
that  Mrs.  Walker,  by  accepting  the  provisions  of  her  husband's 
will,  waived  her  right  to  institute  this  suit.  But  this  is  giving 
an  effect  to  the  acceptance  not  warranted  by  the  terms  of  the 
will,  or  any  thing  connected  with  the  case.  Dr.  Walker,  in  his 
will,  saw  fit  to  make  a  limited  provision  for  his  wife,  and  to  de- 
clare that  it  was  to  be  received,  with  the  income  under  the  trust 
deed,  in  full  satisfaction  of  dower  in  his  estate.  Nothing  is  said 
about  the  other  trust,  under  which  he  received  the  separate 
property  of  his  wife  to  be  invested^  and  it  is  hard  to  see  how 
his  estate  can  be  released  from  accounting  for  it,  or  the  status 
of  the  complainant  affected,  because  she  consents  to  take  under 
the  will  what- is  given  her  in  satisfaction  of  dower. 

It  is  objected  that  the  executors  are  not  liable  to  this  suit, 
because  it  was  commenced  within  one  year  after  they  gave  bonds 
for  the  discharge  of  their  trust.  But  this  defense  is  not  now 
open  to  the  respondents.  To  have  availed  themselves  of  it,  it 
was  necessary  that  it  should  have  been  presented  at  the  earliest 
stage  of  the  proceedings.  In  not  doing  so,  they  will  be  consid- 
ered as  having  waived  their  right  to  insist  that  the  suit  was 
brought  too  soon. 

The  remaining  questions  in  this  case  relate  to  the  exceptions 

(a)  Green's  Administrator  T.  Creighlon,  23  Howard,  90;  Harvey  v.  Richards,  1 
Mason,  381. 


320  WALKER  v.  WALKER, 

of  the  parties  to  the  master's  report.  In  dealing  with  these 
exceptions,  it  seems  to  us  that  all  we  are  required  to  notice  are 
embraced  in  three  different  points  of  inquiry : 

1.  Did  the  master  err  in  allowing  Dr.  Walker  $2,400,  as  a 
deduction  from  the  income  of  the  trust  property  ? 

2.  Should  the  interest  charged  against  the  trustee  be  com- 
pounded annually,  or  semi-annually  ? 

3.  Was   the   trustee   entitled   to  any   compensation    for   his 
services  ? 

The  solution  of  the  first  inquiry  depends  on  the  effect  to  be 
given  to  the  receipt  or  memorandum  signed  by  the  complainant, 
dated  March  27,  1847.  The  complainant  insists,  in  the  adjust- 
ment of  the  account  the  master  mistook  the  effect  of  the  instru- 
ment, and  that  he  should  have  allowed  as  a  credit  against  her 
$1,500,  instead  of  $2,400.  It  is  not  easy,  after  this  lapse  of 
time,  to  tell  the  exact  basis  on  which  the  accounts  should  be 
settled  with  reference  to  this  receipt.  It  was  a  memorandum 
made  when  the  parties  were  living  in  harmony,  and^aftcr  Dr. 
Walker  had  undertaken  to  invest  for  his  wife  the  first  check 
delivered  to  him  by  her,  and  after  her  purpose  was  manifest 
that  the  entire  income  of  her  estate  should  be  invested  to  pro- 
vide against  the  contingencies  of  the  future.  And  yet  this 
memorandum  shows  that  she  so  far  modified  this  purpose  as  to 
authorize  her  husband  to  give  for  her  $1,200  to  each  of  her 
two  sons,  and  expressed  the  intention  of  making  an  equal  dona- 
tion to  her  other  children.  The  matter  was  probably  adjusted 
between  the  parties,  and,  although  there  is  no  proof  on  the  sub- 
ject, the  Circuit  Court,  doubtless,  in  approving  this  part  of  the 
master's  report,  acted  on  the  idea  that  by  long  acquiescence  it 
should  be  treated  as  having  been  settled.  We  can  not  say  that 
this  view  of  the  subject  is  wrong,  and  the  exception  is,  there- 
fore, overruled. 

2.  The  next  exception  relates  to  the  manner  of  computing 
interest.  That  Dr.  Walker  acted  in  utter  disregard  of  his  trust, 
is  too  plain  for  controversy.  He  treated  the  money  as  his  own ; 
neither  kept  nor  rendered  any  account  of  his  trust;  and  his 
conduct  throughout  is  irreconcilable  with  the  intention  to  per- 
form his  agreement.  There  is  not  a  shadow  of  excuse  for  his 
neglect.  The  reason  assigned  for  it  to  his  daughter,  when  on 


IN  THE  SUPREME  COURT  OF  THE  U.  STATES 

his  sick-bed,  that  he  had  not  been  able  to  find  safe  investments 
for  the  money,  was  the  merest  pi'etense.  It  could  not  be  other- 
wise, as  he  was  an  intelligent  man,  of  large  wealth,  and  well  in- 
formed on  the  subject  of  investing  moneys.  The  condition  of 
his  estate  shows  that  he  had  abundant  opportunities  for  profita- 
ble investment  on  his  own  account  j  and  if  so,  how  can  it  truth- 
fully be  said  he  could  not  find  safe  investments  for  the  small 
sums  in  his  hands  belonging  to  his  wife  ?  A  court  of  equity, 
the  especial  guardian  of  trusts,  will  not  tolerate  excuses  of  this 
sort,  on  the  part  of  a  trustee,  for  omitting  to  discharge  his  duty 
to  his  ccstui  qtie  trust.  There  is,  therefore,  no  hesitation  in  the 
court  to  allow,  in  the  adjustment  of  the  trustee's  account,  the 
interest  to  be  compounded  annually.  It  has  been  argued,  with 
earnestness,  that  this  is  a  case  for  severe  treatment,  and  that 
the  master  should  have  allowed  semi-annual  rests ;  but  we  are 
not  at  liberty  to  discuss  the  subject,  as  the  Court  are  equally 
divided  "in  opinion  upon  the  question  which  it  presents. 

3.  The  master  was  wrong  in  allowing  any  compensation  to 
the  trustee  for  his  services ;  and  the  exception  taken  to  that 
part  of  the  report  is,  therefore,  sustained.  To  hold  that,  in  a 
case  like  this,  the  trustee  should  be  allowed  compensation,  when 
he  literally  did  nothing  toward  executing  his  trust,  but,  on  the 
contrary,  was  guilty  of  the  grossest  abuses  concerning  it,  would 
be  a  departure  from  correct  principle.  The  sustaining  this 
exception  renders  a  modification  of  the  decree  in  the  Circuit 
Court  necessary.  That  court  passed  a  decree  in  favor  of  the 
complainant  for  $81,750.85.  It  should  have  been  increased  by 
the  addition  of  $1,682.38,  which  sum  was  deducted,  in  the  ac- 
count stated,  for  the  trustee's  services.  The  decree  of  the 
Circuit  Court  is,  therefore,  modified,  on  the  basis  that  the  com- 
plainant, at  the  time  it  was  rendered,  was  entitled  to  recover 
from  the  respondents  the  sum  of  $83,433.23. 

Interest  will  follow  from  the  date  of  the  decree,  at  the  rate 
•allowed  on  judgments  and  decrees  in  Massachusetts. 

21 


322  —  33^}  KING  *•  TALBOTT, 


ARTHUR  KING,  RESPONDENT,  v.  CHARLES  N.  TALBOTT,  EXEC- 
UTOR, et  al,  AND  DAVID  W.  OLYPHANT,  ADMINISTRATOR 
OF  DAVID  W.  C.  OLYPHANT,  EXECUTOR  OF  CHARLES  W. 
KING,  DECEASED,  APPELLANTS. 

ANNA  HENRIETTA  KING,  RESPONDENT,  v.  THE  SAME,  APPEL- 
LANTS. 

CHARLOTTE  E.  KING,  EXECUTRIX  OF 'WILLIAM  V.  KING,  DE- 
CEASED, RESPONDENT,  v.  THE  SAME,  APPELLANTS. 

[Decided  at  the  March  term,  1869,  of  the  Court  of  Appeals  of  New 
York,  Judge  LEWIS  B.  WOODRUFF  delivering  the  opinion.  Reported  in 
40  New  York  (Hand's),  76.] 

The  law,  in  this  State,  imposes  upon  trustees,  holding  trust  funds  for  investment 
for  the  benefit  of  minor  children  to  be  supported  from  the  income  accruing 
therefrom,  the  duty  of  placing  them  in  a  state  of  security,  of  seeing  that 
they  are  productive  of  interest,  and  of  so  keeping  them,  that  they  may  al- 
ways be  subject  to  future  recall,  for  the  benefit  of  the  cestui  gue  trust. 

The  investment  of  such  funds  by  a  trustee  in  canal,  bank,  insurance,  railroad, 
or  other  stocks  of  private  corporations,  is  a  violation  of  his  duty  and  the 
obligation  of  his  trust. 

As  to  money  held  upon  trust  of  this  kind,  it  is  not  according  to  the  nature  of 
the  trust,  nor  within  any 'just  idea  of  prudence,  to  place  the  principal  of  the 
fund  in  a  condition  in  which  it  is  necessarily  exposed  to  the  hazard  of  loss 
or  gain,  according  to  the  success  or  failure  of  the  enterprise  in  which  it  is 
embarked,  and  in  which,  by  the  very  terms  of  the  investment,  the  principal  is 
not  to  be  returned  at  all. 

Accordingly,  held  (all  the  judges  concurring),  that  where  the  interest  upon  cer- 
tain legacies  were,  by  the  terms  of  the  will,  to  be  applied  by  the  executors, 
so  far  as  required,  to  the  maintenance  and  education  of  the  legatees  during 
their  minority,  and  the  principal,  with  any  accumulations  thereon,  to  be  paid 
to  them  severally  on  their  coming  of  age,  and  the  executors,  upon  whom  the 
trust  was  imposed,  invested  the  funds  in  stock  of  the  Delaware  and  Hudson 
Canal  Company,  the  New  York  and  Harlem  Railroad  Company1,  New  York 
and  New  Haven  Railroad  Company,  the  Bank  of  Commerce,  and  the  Sara- 
toga and  Washington  Railroad  Company,  the  legatees,  upon  coming  of  age, 
were  not  bound  to  accept  such  investments,  but  had  the  right  to  call  upon 
the  executors  to  pay  over  the  whole  amount  of  their  legacies  and  interest 
thereon. 

Held,  further,  that  the  proper  rate  of  interest,  with  which  the  executors  are  to  be 
charged  in  such  case,  is  six  per  cent,  with  annual  rests. 

The  proper  mode  of  making  up  the  interest  account  upon  this  basis,  where  the 
executors,  have  made  advances  for  the  maintenance  of  the  legatees  during 
their  minority,  stated. — WOODRUFF,  J. 


IN  THE  NEW  YORK  COURT  OF  APPEALS.  323 

It  seems,  that  cestuis  que  trust,  in  the  case  of  improper  investments,  which  are 
divisible,  are  not  limited  to  rejection  of  all  or  none  of  them,  but  may  accept 
such  as  they  choose  and  reject  the  others. — WOODRUFF,  J. 

Where  no  provision  is  made  by  a  testator  for  the  support  of  his  minor  children, 
other  than  by  the  income  to  be  derived  from  the  legacies  bequeathed  to 
them,  as  between  the  legatees  and  the  estate,  such  legacies  draw  interest 
from  the  death  of  the  testator. 

In  this  State,  a  trustee  holding  funds  for  investment  for  the  benefit  of  minor 
children,  must  invest  in  Government  or  real  estate  securities.  Any  other 
investment  would  be  a  breach  of  duty,  and  the  trustee  personally  liable. — • 
MURRAY,  GROVER,  DANIELS,  and  JAMES,  J.  J.  Contra,  HUNT,  C.  J.,  MASON, 
and  LOTT,  J.  J. 

These  appeals  were  argued  together  on  the  6th  day  of  January, 
1869,  and  decided  on  the  18th  of  March,  1869. 

THESE  were  actions  brought  separately  by  William  Vernon 
King,  Anna  Henrietta  King,  and  Arthur  King,  the  three  chil- 
dren of  Charles  W.  King,  deceased,  against  the  surviving  exec- 
utor and  the  administrator  of  a  deceased  executor  of  said 
Charles,  for  an  account  of  the  moneys  due  them  respectively, 
for  the  principal  and  accumulations  of  their  respective  legacies 
under  their  father's  will,  and  for  the  payment  over  of  the 
amounts  found  due.  The  causes  were  tried  together  at  special 
term,  before  a  justice  of  the  Supreme  Court,  from  whose  de- 
crees all  parties  appealed  to  the  general  term,  where  they  were 
affirmed,  without  costs  of  appeal.  The  defendants  appealed  to 
this  Court.  The  plaintiffs  also  brought  cross-appeals  from  that 
part  of  the  decrees,  allowing  interest  to  the  defendants  on  their 
payments  for  maintenance  of  the  plaintiffs'  postponing  interest 
on  the  legacies,  until  a  year  from  the  testator's  death,  and  some 
other  minor  credits. 

William  Vernon  King  died  after  the  commencement  of  his 
action ;  and  his  executrix  was  substituted  as  the  plaintiff. 

Charles  W.  King,  the  father,  died  on  a  voyage  from  Ceylon 
to  Suez,  September  26,  1845,  leaving  a  widow  and  these  three 
children,  all  then  infants.  By  his  will,  made  at  Macao,  he  be- 
queathed to  each  of  his  three  children  the  sum  of  $15,000 ;  "the 
interest  on  the  same,  so  far  as  required,  to  be  applied  to  their 
maintenance  and  education,  and  the  principal,  with  any  accumu- 
lations thereon,  to  be  paid  to  them  severally  on  their  majority." 
He  intrusted  to  the  " discretion"  of  his  executors,  "the  settle- 


324  KING  v.  TALBOTT? 


merit  of  my  affairs,  and  the  investment  of  my  estate  for  the 
benefit  of  my  heirs."  The  defendants  named,  and  who  qualified 
as  his  executors,  had  been  his  partners  in  business,  both  at  Ne\v 
York  and  in  China. 

The  will  was  proved  abroad,  and  letters  issued  December  5, 
1846.  The  executors,  prior  to  December  31,  1849,  had  pos- 
sessed themselves  of  the  estate,  to  the  amount  of  over  $105,000. 
On  the  16th  day  of  December,  1847,  they  filed  an  inventory 
amounting  to  over  $106,000.  They  did  not  collect  or  have  in 
their  hands  for  investment  so1  large  an  amount  as  45,000,  until 
June  9,  1847.  No  account  has  ever  been  rendered  by  them  to 
the  surrogate  of  their  administration. 

Between  March  5  and  December  19,  1847,  the  executors 
invested,  in  United  States  treasury-notes  and  Ohio  State  bonds, 
a  sum  exceeding  $45,000  of  th  moneys  of  the  estate.  Between 
August  1,  1848,  and  November  10,  1849,  they  sold  $41,986  of 
said  investment,  at  a  profit  of  $1,312.77,  and  reinvested  the 
money  realized  from  such  sales  in  Delaware  and  Hudson  Canal 
Company  stocks,  Saratoga  and  Washington  Railroad  Company 
stocks,  New  York  and  New  Haven  Railroad  Company  stocks, 
Harlem  Railroad  Company  stocks,  Hudson  River  Railroad  Com- 
pany bonds,  and  Bank  of  Commerce  stock  and  scrip,  for  account 
of  the  children. 

On  the  1st  day  of  April,  1850,  they  set  apart  for  the  chil- 
dren, as  an  investment  of  their  legacies,  the  following  stocks  and 
bonds,  constituting  a  portion  of  the  aforesaid  investments,  at  an 
estimated  valuation  equal  to  the  price  paid  by  them :  $4,000 
of  Ohio  7  per  cent  stocks,  at  103,  and  -J-  brokerage,  $4,130; 
S3, 500  of  Ohio  5  per  cent  stocks,  at  92,  and  %  brokerage, 
83,228.75;  45  shares  of  the  stock  of  the  Delaware  and  Hudson 
Canal  Company,  and  five  shares  of  scrip  stock  of  said  company, 
at  §7,758.75;  40  shares  Saratoga  and  Washington  Railroad 
Company  stock,  at  $3,411.70;  200  shares  preferred  stock,  New 
York  and  Harlem  Railroad  Company,  at  $10,025;  $10,000  in 
amount  in  bonds  of  Hudson  River  Railroad  Company,  $9,687.50  ; 
125  "shares  of  the  scrip  stock  of  the  Bank  of  Commerce,  $4,- 
306.25  ;  30  shares  stock  New  York  and  New  Haven  Railroad 
Company,  $2,482.50;  making,  in  all,  $45,390.45.  And  they 
opened  an  account  of  these  investments  with  the  children,  and 


IN  THE  NEW  YORK  COURT  OF  APPEALS.  325 

debited  it  with  the  $45,390.45,  and  also  the  income  therefrom, 
and  credited  the  same  with  payments  made  for  the  support  and 
maintenance  of  said  children.  They,  on  the  same  day,  paid  over 
the  balance  of  the  estate  to  the  residuary  legatee. 

The  Ohio  7  per  cents  were  redeemed  in  January,  1852;  and 
the  Ohio  5  per  cents  were  redeemed  in  January,  1857;  and  the 
proceeds  invested  in  Bank  of  Commerce  scrip  and  New  York 
Central  bonds. 

"it  was  found  by  the  judge  who  tried  the  causes,  that,  at  the 
time  these  investments  were  made,  and  at  the  time  said  stocks 
and  bonds  were  set  apart,  as  well  as  at  the  time  the  others  were 
subsequently  purchased,  the  stocks  and  bonds  were  in  good  re- 
pute, and  were  considered  by  men,  upon  whose  judgment  it  was 
proper  to  'rely,  as  safe  and  desirable  investments.  The  invest- 
ments were  made  and  set  apart  in  good  faith,  the  executors 
having  invested  their  own  funds  in  similar  stocks,  and  retained 
the  same. 

D.  W.  C.  Olyphant,  one  of  the  executors,  died  in  June,  1851, 
and  the  defendant  Olyphant  was  appointed  administrator  of  his 
estate. 

The  testator  made  no  provision  for  the  support  of  his  chil- 
dren other  than  that  contained  in  his  will.  From  his  death  to 
April,  1850,  they  resided  with  their  mother.  The  income,  which 
had  been  realized  from  the  investments  of  the  estate  up  to  April 
1,  1850,  was  divided  by  the  executors  between  the  mother  (re- 
siduary legatee)  and  the  children,  in  the  proportions  in  which 
they  were  respectively  entitled  to  the  estate,  and  some  advances 
for  maintenance  of  the  children  made  in  addition. 

The  children  now  reject  the  stock  investments  made  by  the 
executors,  and  claim  that  the  defendants  should  be  made  liable 
for  all  moneys  invested  in  these  stocks,  with  interest  from  the 
death  of  the  testator,  and  for  all  profits  resulting  from  their 
dealings  with  such  moneys,  and  bring  these  actions  to  enforce 
such  claims. 

The  court,  at  special  term,  decided  that  it  was  the  duty  of 
the  executors,  within  a  reasonable  time  after  the  receipt  of  a 
sufficient  amount  of  funds  belonging  to  the  estate,  to  invest  the 
amount  of  the  legacies  in  the  stocks  of  the  United  States,  and 
of  the  State  of  New  York,  and  keep  the  same  so  invested;  and 


326  KING  v.  TALBOTT, 


having  failed  to  do  so,  their  investments  were  invalid,  and  the 
executors  were  personally  liable  for  the  amount  of  the  legacies, 
Avith  compound  interest  from  September  1,  1846,  at  7  per  cent. 
It  also  held,  that  the  conduct  of  the  executors  was  in  good  faith, 
and  without  fraud ;  the  children  must,  therefore,  reject  all  or 
none  of  the  investments ;  and  that  the  executors  were  entitled 
to  commissions.  It  was  referred  to  a  referee,  to  make  up  an 
account,  charging  the  executors  with  the  legacies,  on  the  26th 
of  September,  1846  (one  year  from  the  death  of  the  testator), 
and  with  interest  thereon,  at  7  per  cent,  from  that  date,  com- 
puted ivith  annual  rests.  The  referee  stated  an  account  upon 
this  basis,  crediting  the  executors  Avith  their  payments,  for  main- 
tenance and  support  of  the  children,  each  year,  and  interest  on 
such  payments,  from  the  date  of  each,  to  the  ensuing  26th  of 
September,  when  such  payments,  with  the  commissions  and  in- 
terest, were  deducted  from  the  amount  of  the  legacies,  and  the 
year's  interest  then  accrued  upon  them,  and  the  executors  Avere 
debited  with  the  balance,  as  a  new  principal.  From  that,  in- 
creased by  a  year's  interest  thereon,  to  the  ensuing  26th  of 
September,  again,  the  amount  of  their  payments  in  the  mean 
time,  with  interest  and  commissions,  were  deducted,  leaving  a 
new  principal,  and  so  on,  to  the  final  balance.  The  decree  was 
entered  in  accordance  with  this  report. 

Stephen  P.  Nash,  for  the  appellants.  George  N.  Titus,  for 
respondents. 

WOODRUFF,  J. :  Tt  is  conceded  that,  in  England,  the  rule  is, 
and  has  long  been  settled,  that  a  trustee,  holding  funds  to  invest 
for  the  benefit  of  his  cestui  que  trust,  is  bound  to  make  such  in- 
vestment in  the  public  debt,  for  the  safety  Avhereof  the  faith  of 
their  Government  is  pledged ;  or  in  loans,  for  which  real  estate 
is  pledged  as  security.  And  that,  although  the  terms  of  the 
trust  commit  the  investment,  in  general  terms,  to  the  discretion 
of  the  trustee,  that  discretion  is  controlled  by  the  above  rule, 
and  is  to  be  exercised  within  the  very  narrow  limits  which  it 
prescribes. 

As  a  purely  arbitrary  rule,  resting  upon  any  special  policy 
of  that  country,  or  on  any  peculiarity  in  its  condition,  it  lias  no 
application  to  this  country.  It  is  not  of  the  common  law.  It 


IN  THE  NEW  YORK  COURT  OF  APPEALS.  327 

had  no  applicability  to  the  condition  of  this  eountry,  while  a 
colony  of  Great  Britain,  and  can  not  be  said  to  have  been  incor- 
porated in  our  law. 

So  far,  and  so  far  only,  as  it  can  be  said  to  rest  upon  funda- 
mental principles  of  equity,  commending  themselves  to  the  con- 
science, and  suited  to  the  condition  of  our  affairs,  so  far,  it  is 
true  that  it  has  appropriate  application  and  force,  as  a  guide  to 
the  administration  of  a  trust,  here,  as  well  as  in  England. 

I  do  not,  therefore,  deem  it  material  to  inquire,  through  the 
multitude  of  English  cases,  and  the  abundant  texts  of  the  law 
writers,  into  the  origin  of  the  rule  in  England,  or  the  date  of  its 
early  promulgation.  Nor,  in  this  particular  case,  do  I  deem  it 
necessary  to  determine  whether  it  should,  by  precise  analogy, 
be  deemed  to  prohibit  here  investments  in  any  other  public  debt 
than  that  of  the  State  of  New  York. 

Neither,  in  my  judgment,  are  we  at  liberty,  in  the  decision 
of  this  case,  to  propound  any  new  rule  of  conduct,  by  which  to 
judge  of  the  liability  of  trustees,  now  subjected  to  examination. 
Under  trusts  heretofore  created,  the  managers  thereof  performed 
their  duty  with  the  aid  of  rules  for  the  exercise  of  their  discretion, 
which  were  the  utterance  of  equity  and  good  conscience,  intel- 
ligible to  their  understanding,  and  available  for  their  information ; 
otherwise,  trusts  heretofore  existing  have  been  traps  and  pitfalls 
to  catch  the  faithful,  prudent,  and  diligent  trustee,  without  the 
power  to  avoid  them. 

But  it  is  not  true,  that  there  is  no  underlying  principle  or 
rule  of  conduct  in  the  administration  of  a  trust,  which  calls  for 
obedience.  Whether  it  has  been  declared  by  the  courts  or  not, 
whether  it  has  been  enacted  in  statutes  or  not,  whether  it  is  in 
familiar  recognition  in  the  affairs  of  life,  there  appertains  to  the 
relation  of  trustee,  and  cestui  que  trust,  a  duty,  to  be  faithful, 
io  be  diligent,  to  be  prudent,  in  an  administration  intrusted 
to  the  former,  in  confidence  in  his  fidelity,  diligence,  and 
prudence. 

To  this  general  statement  of  the  duty  of  trustees,  there  is  no 
want  of  promulgation  or  sanction,  nor  want  of  sources  of  infor- 
mation for  their  guidance.  In  the  whole  history  of  trusts,  in 
decisions  of  courts  for  a  century  in  England,  in  all  the  utter- 
ances of  the  courts  of  this  and  the  other  States  of  this  country, 


KING  v.  TALBOTT, 


and  not  less  in  the  conscious  good  sense  of  all  intelligent  minds, 
its  recognition  is  uniform. 

The  real  inquiry,  therefore,  is,  in  my  judgment,  in  the  case 
before  us,  and  in  all  like  cases,  Has  the  administration  of  the 
trust,  created  by  the  will  of  Charles  W.  King,  for  the  benefit  of 
the  plaintiff,  been  governed  by  fidelity,  diligence,  and  prudence? 
If  it  has,  the  defendants  are  not  liable  for  losses  which,  never- 
theless, have  happened. 

This,  however,  aids  but  little  in  the  examination  of  the  de- 
fendant's conduct,  unless  the  terms  of  definition  are  made  more 
precise.  What  are  fidelity,  diligence,  and  discretion  ?  and  what 
is  the  measure  thereof,  which  trustees  are  bound  to  possess  and 
exercise  ? 

It  is  hardly  necessary  to  say,  that  fidelity  imports  sincere 
and  single  intention  to  administer  the  trust  for  the  best  interest 
of  the  parties  beneficially  interested,  and  according  to  the  duty 
which  the  trust  imposes.  And  this  is  but  a  paraphrase  of 
"good  faith." 

The  meaning  and  measure  of  the  required  prudence  and  dil- 
igence has  been  repeatedly  discussed,  and  with  a  difference  of 
opinion.  In  extreme  rigor,  it  has  sometimes  been  said  that 
they  must  be  such  and  as  great  as  that  possessed  and  exercised 
by  the  Court  of  Chancery  itself.  And,  again,  it  has  been  said 
that  they  are  to  be  such  as  the  trustee  exercises  in  the  conduct 
of  his  own  affairs,  of  like  nature ;  and  between  these  is  the  dec- 
laration that  they  are  to  be  the  highest  prudence  and  vigilance, 
or  they  will  not  exonerated 

My  own  judgment,  after  an  examination  of  the  subject,  and 
bearing  in  mind  the  nature  of  the  office,  its  importance,  and  the 
considerations  which  alone  induce  men  of  suitable  experience, 
capacity,  and  responsibility  to  accept  its  usually  thankless 
burden,  is,  that  the  just  and  true  rule  is,  that  the  trustee  is 
bound  to  employ  such  diligence  and  such  prudence  in  the 
care  and  management  as,  in  general,  prudent  men,  of  dis- 
cretion and  intelligence  in  such  matters,  employ  in  their  own 
like  affairs. 

This  necessarily  excludes  all  speculation,  all  investments  for 
an  uncertain  and  doubtful  rise  in  the  market,  and,  of  course, 
every  thing  that  does  not  take  into  view  the  nature  and  object 


IN  THE  NEW  YORK  COURT  OF  APPEALS.  329 

of  the  trust,  and  the  consequences  of  a  mistake  in  the  selection 
of  the  investment  to  be  made. 

It,  therefore,  does  not  follow  that,  because  prudent  men  may, 
and  often  do,  conduct  their  own  affairs  with  the  hope  of  growing 
rich,  and  therein  take  the  hazard  of  adventures  which  they  deem 
hopeful,  trustees  may  do  the  same ;  the  preservation  of  the  fund, 
and  the  procurement  of  a  just  income  therefrom,  are  primary 
objects  of  the  creation  of  the  trust  itself,  and  are  to  be  primarily 
regarded. 

If  it  be  said,  that  trustees  are  selected  by  the  testator,  or 
donor  of  the  trust,  from  his  own  knowledge  of  their  capacity, 
and  without  any  expectation  that  they  will  do  more  than,  in 
good  faith,  exercise  the  judgment  and  discretion  they  possess, 
the  answer  is :  First,  the  rule  properly  assumes  the  capacity  of 
the  trustees  to  exercise  the  prudence  and  diligence  of  prudent 
men,  in  general ;  and,  second,  it  imposes  the  duty  to  observe 
and  know,  or  learn,  what  such  prudence  dictates  in  the  matter 
in  hand. 

And,  once  more,  the  terms  of  the  trust,  and  its  particular 
object  and  purpose,  are,  in  no  case,  to  be  lost  sight  of  in  its 
administration. 

Lewin,  in  his  Treatise  on  the  Law  of  Trusts,  etc.,  page  332, 
states,  as  the  result  of  the  several  cases,  and  as  the  true  rule, 
that  u  a  trustee  is  bound  to  exert  precisely  the  same  care  and 
solicitude,  in  behalf  of  his  cestui  que  trust,  as  he  would  do  for 
himself;  but  greater  measure  than  this  a  court  of  equity  will  not 
exact."  In  general,  this  is  true ;  but  if  it  imports  that,  if  he  do 
what  men  of  ordinary  prudence  would  not  do  in  their  own  af- 
fairs of  a  like  nature,  he  will  be  excused  on  showing  that  he 
dealt  with  his  own  property  in  like  want  of  discretion,  it  can 
not  be  sustained  as  a  safe  or  just  rule  toward  cestuis  que  trust ; 
nor  is  it  required  by  reasonable  indulgence  to  the  trustee ;  it 
would  be  laying  the  duty  to  be  prudent  out  of  view  entirely,  and 
I  can  not  think  the  writer  intended  it  should  be  so  understood. 

The  Massachusetts  cases,  9  Pickering,  140;  20  Pick.  116, 
cited  by  the  counsel  for  the  defendants,  are  in  better  conformity 
with  the  rule  as  I  have  stated  it. 

To  apply  these  general  views  to  the  case  before  us,  and  with 
the  deductions  which  necessarily  flow  from  their  recognition : 


330  KING  v.  TALBOTT, 


The  testator  gave  to  each  of  his  children  fifteen  thousand  dol- 
lars, the  interest  on  the  same,  so  far  as  required,  to  be  applied 
to  their  maintenance  and  education,  and  the  principal,  with  any 
accumulations  thereon,  to  be  paid  to  them  severally  on  their 
majority ;  appointed  the  defendant  Talbott,  and  his  partner, 
Mr.  Olyphant,  executors,  "  intrusting  to  their  discretion  the  set- 
tlement of  my  affairs,  and  the  investment  of  my  estate  for  the 
benefit  of  my  heirs." 

If  I  am  correct  in  my  views  of  the  duty  of  trustees,  this 
last  clause  neither  added  to,  nor  in  any  wise  affected,  the  duty 
or  responsibility  of  these  executors ;  without  it,  they  were 
clothed  with  discretion ;  with  it,  their  discretion  was  to  be  exer- 
cised with  all  the  care  and  prudence  belonging  to  their  trust- 
relation  to  the  beneficiaries.  Such  is  the  distinct  doctrine  of  the 
cases  very  largely  cited  by  the  counsel  for  the  parties,  and  is,  I 
think,  the  necessary  conclusion  from  the  just  rule  of  duty  I 
have  stated. 

What,  then,  was  the  office  of  the  trustees,  as  indicated  by 
the  terms  and  nature  of  the  trust  ?  If  its  literal  reading  be 
followed,  it  directed  that  " fifteen  thousand  dollars"  in  money 
be  placed  at  "  interest.''  The  nature  of  the  trust,  according  to 
the  manifest  intent  of  the  testator,  required  that,  in  order  to  the 
maintenance  and  support  of  infant  children,  whose  need  in  that 
regard  would  be  constant  and  unremitting,  that  interest  should 
flow  in  with  regularity,  and  without  exposure  to  the  uncertain- 
ties or  fluctuations  of  adventures  of  any  kind.  And  then  the 
fund  should  continue,  with  any  excess  of  such  interest  accumu- 
lated for  their  benefit,  so  as  to  be  delivered  at  the  expiration  of 
their  minority. 

Palpably,  then,  the  first  and  obvious  duty  was  to  place  that 
fifteen  th6usand  dollars  in  a  state  of  security ;  second,  to  see  to 
it  that  it  was  productive  of  interest;  and,  third,  so  to  keep  the 
fund,  that  it  should  always  be  subject  to  future  recall  for  the 
benefit  of  the  cestuis  que  trust. 

I  do  not  attach  controlling  importance  to  the  word  li  inter- 
est," used  by  the  testator,  but  I  do  regard  it  as  some  guide  to 
the  trustees,  as  an  expression  of  the  testator,  that  he  did  not 
contemplate  any  adventure  with  the  fund,  with  a  view  to  profits 
as  such. 


IN  THE  NEW  YORK  COURT  OF  APPEALS.  331 

But,  apart  from  the  inference  from  the  use  of  that  word,  I 
think  it  should  be  said,  that  whenever  money  is  held  upon  a 
trust  of  this  description,  it  is  not  according  to  its  nature,  nor 
within  any  just  idea  of  prudence,  to  place  the  principal  of  the 
fund  in  a  condition  in  which  it  is  necessarily  exposed  to  the 
hazard  of  loss  or  gain,  according  to  the  success  or  failure  of  the 
enterprise  in  which  it  is  embarked,  and  in  which,  by  the  very 
terms  of  the  investment,  the  principal  is  not  to  be  returned  at  all. 

It  is  not  denied  that  the  employment  of  the  fund  as  capital, 
in  trade,  would  be  a  clear  departure  from  the  duty  of  trustees. 
If  it  can  not  be  so  employed  under  the  management  of  a  co- 
partnership, I  see  no  reason  for  saying  that  the  incorporation 
of  the  partners  tends,  in  any  degree,  to  justify  it.  The  moment 
the  fund  is  invested  in  bank,  or  insurance,  or  railroad  stock,  it 
has  left  the  control  of  the  trustees ;  its  safety  and  the  hazard, 
or  risk,  of  its  loss,  is  no  longer  dependent  upon  their  skill,  care, 
or  discretion,  in  its  custody  or  management,  and  the  terms  of 
the  investment  do  not  contemplate  that  it  ever  will  be  returned 
to  the  trustees  (a). 

If  it  be  said  that  at  any  time  the  trustees  may  sell  the  stock 
(which  is  but  another  name  for  their  interest  in  the  property  and 
business  of  the  corporation),  and  so  repossess  themselves  of  the 
original  capital,  I  reply,  that  is  necessarily  contingent  and  un- 
certain ;  and  so  the  fund  has  been  voluntarily  placed  in  a  con- 
dition of  uncertainty,  dependent  upon  two  contingencies :  First, 
the  practicability  of  making  the  business  profitable ;  and,  second, 
the  judgment,  skill,  and  fidelity  of  those  who  have  the  manage- 
ment of  it  for  that  purpose. 

If  it  be  said  that  men  of  the  highest  prudence  do,  in  fact, 
invest  their  funds  in  such  stocks,  becoming  subscribers  and 

(a)  A  testator  made  a  bequest  to  his  nephew,  of  a  part  of  an  uncollected 
fund,  "In  trust,  however,  to  manage,  invest,  and  pay  over  to  his  brother  Jarrett 
and  to  his  children,  from  time  to  time,  as  he  for  the  best  interest  of  him  or  them 
from  time  to  time  shall  deem  most  beneficial."  Held:  1.  That  the  trustee  was 
authorized  to  invest  and  reinvest  this  fund  in  any  kind  of  property,  according 
to  his  discretion,  and  might,  by  sale  or  otherwise,  change  the  property  "from 
time  to  time,"  as  he  might  deem  most  advantageous ;  and,  2.  That  all  the  ben- 
eficiaries are  coequal  participants  in  the  trust  fund,  and  in  the  distribution  of 
its  benefits.  The  only  discretion  confided  to  the  trustee,  in  this  respect,  is  in  the 
time  and  mode  of  allotment  to  each,  or  enjoyment  by  each,  but  altogether  and 
finally  approximating  equality  as  near  as  possible,  Luzon  v.  Wilgus,  7  Bush,  205. 


332  KING  v.  TALBOTT, 


contributors  thereto,  in  the  very  formation  thereof,  and  before 
the  business  is  developed,  and  in  the  exercise  of  their  judgment, 
on  the  probability  of  its  safety  and  productiveness,  the  answer 
is,  so  do  just  such  men,  looking  to  the  hope  of  profitable  returns, 
invest  money  in  trade,  and  adventures  of  various  kinds.  In 
their  private  affairs  they  do,  and  they  lawfully  may,  put  their 
principal  funds  at  hazard ;  in  the  affairs  of  a  trust  they  may 
not.  The  very  nature  of  their  relation  to  it  forbids  it. 

If  it  it  be  said  that  this  reasoning  assumes  that  it  is  cer- 
tainly practicable  so  to  keep  the  fund  that  it  shall  be  productive, 
and  yet  safe  against  any  contingency  of  loss ;  whereas,  in  fact, 
if  loaned  upon  bond  and  mortgage,  or  upon  securities  of  any 
description,  losses  from  insolvency  and  depreciation  may,  and 
often  do,  happen,  notwithstanding  due  and  proper  care  and  cau- 
tion is  observed  in  their  selection, — not  at  all.  It  assumes  and 
insists,  that  the  trustees  shall  not  place  the  fund  where  its  safety 
and  due  return  to  their  hands  will  depend  upon  the  success  of 
the  business  in  which  it  is  adventured,  or  the  skill  and  honesty 
of  other  parties  intrustecl  with  its  conduct ;  and  it  is  in  the  se- 
lection of  the  secui'ities  for  its  safety  and  actual  return,  and 
there  is  scope  for  discretion  and  prudence,  which,  if  exercised 
in  good  faith,  constitute  due  performance  of  the  duty  of  the 
trustees. 

My  conclusion  is,  therefore,  that  the  defendants  were  not  at 
liberty  to  invest  the  fund,  bequeathed  to  the  plaintiff,  in  stock 
of  the  Delaware  and  Hudson  Canal  Company ;  of  the  New  York 
and  Harlem  Railroad  Company ;  of  the  New  York  and  New 
Haven  Railroad  Company  ;  of  the  Bank  of  Commerce  ;  or  of 
the  Saratoga  and  Washington  Railroad  Company  ;  and  that  the 
plaintiff  was  not  bound  to  accept  these  stocks,  as,  and  for,  his 
legacy,  or  the  investment  thereof. 

In  regard  to  the  bonds  of  the  Hudson  River  Railroad-  Com- 
pany, and  of  the  Delaware  and  Hudson  Canal  Company,  it 
appears  by  schedule  B,  given  in  evidence,  that  the  former  were 
mortgage  bonds ;  but  what  was  the  extent  or  sufficiency  of  the 
security  afforded  by  such  mortgage,  or  what  property  was  em- 
braced in  it,  does  not  app"ear,  nor  does  it  appear  whether  there 
was  any  security  whatever  for  the  payment  of  the  canal  com- 
pany's bonds.  It  is  not  necessary  for  the  decision  of  this  case; 


IN  THE  NEW  YORK  COURT  OF  APPEALS.  333 

and  I  am  not  prepared  to  say,  that  an  investment  in  the  bonds 
of  a  railroad,  or  other  corporation,  the  payment  whereof  is  se- 
cured by  a  mortgage  upon  real  estate,  is  not  suitable  and  proper 
under  any  circumstance. 

If  the  real  estate  is  ample  to  insure  the  payment  of  the 
bonds,  I  do  not,  at  present,  perceive  that  it  is  necessarily  to  be 
regarded  as  inferior  to  the  bond  of  an  individual,  secured  by 
mortgage  ;  it  would,  of  course,  be  open  to  all  the  inquiries  which 
prudence  would  suggest  if  the  bond  and  mortgage  were  that  of 
an  individual.  The  nature,  the  location,  and  the  sufficiency  of 
the  security  ;  and  the  terms  of  the  mortgage,  and  its  availability 
for  the  protection  and  ultimate  realization  of  the  fund,  must,  of 
course,  enter  into  the  consideration. 

But  it  is  not  necessary  to  pursue  that  subject.  The  plaintiff, 
in  his  complaint,  rejects  the  entire  investment.  The  court  be- 
low held,  that  it  was  equitable  that  the  plaintiff  should  be  held 
to  receive  the  whole  or  none  of  the  stocks  and  bonds,  and  to 
that  ruling  neither  the  plaintiff  nor  the  defendants  have  ex- 
cepted ;  and  therefore  the  question,  whether  the  judgment  be- 
low was  correct  in  that  respect,  is  not  before  us.  It  is  proper, 
however,  to  say,  that  I  do  not  clearly  apprehend  the  propriety 
of  that  ruling,  unless  it  be  on  the  ground  that  the  plaintiff,  in 
his  complaint,  did  so  elect. 

The  rule  is  perfectly  well  settled,  that  a  cestui  que  trust  is  at 
liberty  to  elect  to  approve  an  unauthorized  investment,  and  enjoy 
its  profits,,or  to  reject  it,  at  his  option;  and  I  perceive  no  reason 
for  saying  that,  where  the  trustee  has  divided  the  fund  into  parts 
and  made  separate  investments,  the  cestui  que  trust  is  not  at 
liberty,  on  equitable  as  well  as  legal  grounds,  to  approve  and 
adopt  such  as  he  thinks  it  for  his  interest  to  approve.  The 
money  invested  is  his  money ;  and  in  respect  to  each  and  every 
dollar,  it  seems  to  me,  he  has  an  unqualified  right  to  follow  it, 
and  claim  the  fruits  of  its  investment,  and  that  the  trustee  can 
not  deny  it.  The  fact  that  the  trustee  has  made  other  invest- 
ments of  other  parts  of  the  funds,  which  the  cestui  que  trust  is 
not  bound  to  approve,  and  disaffirms,  can  not,  I  think,  affect 
the  power.  For  example,  suppose,  in  the  present  case,  the 
cestui  que  trtist,  on  delivery  to  him  of  all  the  securities  and 
bonds  in  which  his  legacy  had  appeared  invested,  had  declared : 


334  KING  v.  TALBOTT, 


Although  these  investments  are  improperly  made,  not  in  accord- 
ance with  the  intent  of  the  testator,  nor  in  the  due  performance 
of  your  duty,  I  waive  all  objection  on  that  account,  except  as 
to  the  stock  of  the  Saratoga  and  Washington  Railroad  Company. 
That  I  reject,  and  return  to  you.  Is  it  doubtful  that  his  posi- 
tion must  be  sustained?  The  result  is,  that  the  main  features 
of  the  judgment  herein  must  be  affirmed. 

The  testator  died  abroad  September  26,  1845.  The  will  was 
proved  in  chancery  October  30,  1846,  and  letters  testamentary 
were  issued  December  5,  1846,  and  the  inventory  of  the  estate 
made  and  filed  the  16th  day  of  December,  1847.  It  is  expressly 
found  by  the  court,  that  the  executors  did  not  collect,  or  have 
in  their  hands  for  investment,  a  sum  sufficient  to  pay  the  three 
legacies  in  question,  until  June  9,  1847.  No  fault  or  negligence 
is  imputed  to  the  executors  in  this  respect.  The  trustees  were, 
therefore,  not  under  any  duty  to  make  the  investment  of  the 
legacies  before  that  time. 

The  question,  whether  these  legacies  bore  interest,  as  a  pro- 
vision for  the  support  of  children  dependent  thereon  for  their 
maintenance,  is  a  very  different  question  from  the  inquiry, 
whether,  as  trustees,  the  executors  were  chargeable  with  inter- 
est, as  income  from  the  legacy  itself. 

As  between  the  children  and  the  estate,  the  legacies  unques- 
tionably bore  interest  from  the  death  of  the  testator;  but  as 
between  them  and  the  trustees  of  the  legacy,  only  from  the 
time  when  the  legacy,  as  such,  was  or  ought  to  have  been 
invested. 

Whatever  sums,  therefore,  the  executors  paid  to  the  mother 
of  these  children  for  their  support  and  maintenance,  was  prop- 
erly charged  to  the  children ;  and  it  is  not  of  the  slightest  im- 
portance, whether  it  was  paid  under  the  name  of  payment  for 
their  support,  or  as  residuary  estate,  upon  which  it  was  properly 
chargeable. 

Had  the  trustees  of  the  legacy  been  other  and  different  per- 
sons from  the  executors,  I  do  not  perceive  that  the  latter  could 
have  refused  to  pay  to  the  trustees,  out  of  the  estate  in  their 
hands,  interest  on  the  legacy,  until  they  were  prepared  to  pay 
it  over  for  investment.  Interest  should,  therefore,  be  allowed 
upon  the  legacy  from  the  death  of  the  testator.  It  is  payable 


IN  THE  NEW  YORK  COURT  OF  APPEALS.  335 

out  of  the  estate,  irrespective  of  the  question  whether  the  estate 
was  itself  producing  income  in  the  hands  of  the  executors,  and 
against  the  executors  as  such,  it  should  be  allowed  only  down 
to  June  5,  1847,  when  there  were  funds  to  be  paid  over  and 
invested,  as  and  for  the  plaintiff's  legacy.  But,  as  the  execu- 
tors and  trustees  are  the  same,  there  is  no  occasion  to  make  a 
rest  at  that  date ;  it  should  be  assumed  in  the  trustees'  account, 
that  the  interest  was  received  annually. 

I  think  it  entirely  clear,  that  the  account  should  be  stated 
.with  annual  rests.  So  nearly  as  may  be,  the  plaintiff  is  entitled 
to  such  benefit  as  he  would  have  derived  from  an  investment  of 
his  legacy.  The  testator  expressly  directs,  that  the  surplus  of 
interest,  not  required  for  maintenance,  be  accumulated  This 
devolved  on  the  trustees  the  duty  to  invest  such  surplus,  from 
year  to  year.  Had  the  trustees  made  the  investment  of  the 
principal  in  the  manner  which  I  think  Avas  their  duty,  and  it 
had  appeared  that  small  amounts  of  surplus  income  necessarily 
remained  unproductive  in  their  hands,  such  necessity  would  ex- 
cuse them  from  any  charge  for  interest  thereon ;  they  would  not 
be  charged  for  income,  which  by  reasonable  diligence  they  could 
not  obtain;  but,  the  duty  to  invest  being  clear,  we  have  no  al- 
ternative, in  the  absence  of  such  actual  investment,  but  to  treat 
the  investment,  for  the  purposes  of  the  accounting,  as  made  when 
it  ought  to  have  been  made ;  that  is,  at  the  end  of  each  year. 

The  manner  in  which  the  account  was  stated  by  the  court 
below,  unless  I  misunderstand  it,  rendered  it  not  only  proper, 
but  necessary,  to  allow  interest  upon  the  payments  made  by  the 
executors  for  maintenance,  for  by  making  the  whole  annual  in- 
come bear  interest  from  the  moment  it  was  received  (or,  as  a 
charge  to  the  trustees,  became  due,  which  is  the  same  thing), 
the  payments,  in  each  year,  were  practically  made  advances,  in 
anticipation  of  the  interest,  which  would  be  payable  at  the  end 
of  that  year;  and,  therefore,  as  the  trustees  were  charged  in- 
terest on  the  previously  accrued  income,  out  of  which  mainte- 
nance was  to  be  provided,  that  charge  must  be  counterbalanced 
by  an  allowance  of  interest,  pro  tanto,  for  so  much  as  was  ap- 
plied to  maintenance. 

The  principle  for  which  the  plaintiff  contends  is  unquestion- 
able correct,  viz :  That  at  no  time,  when  the  trustees  make 


336  KING  v.  TALBOTT, 


payments  for  maintenance,  with  income  in  hand  not  bearing 
interest,  should  they  be  allowed  interest  on  such  payments. 

The  accurate  and  just  mode  of  stating  the  accounts,  is  to 
credit  the  plaintiff,  on  the  day  of  the  decease  of  the  testator, 
September  26,  1845,  with  the  amount  of  the  legacy.  At  the 
end  of  the  year  interest  will  have  accrued  for  twelve  months,  to 
be  then — that  is,  September  26,  1846 — credited.  Any  payments 
for  support,  during  that  twelve  months,  should  be  regarded  as  au 
advance,  and  should,  therefore,  bear  interest;  and  on  the  26th 
September,  1846,  the  balance  being  struck,  it  will  appear  how 
much  of  income  remains  for  the  support  of  plaintiff  for  the  en- 
suing year.  But  as  that,  or  a  then  unknown  portion  thereof, 
will  be  required  during  such  ensiling  year,  the  trustees  would 
not,  had  it  been  received  from  actual  loans  duly  made,  be  re- 
quired to  invest  it,  but  to  retain  it  for  such  support.  If.  how- 
ever, at  the  end  of  such  year — that  is,  September  26,  1847 — any 
portion  of  it  remained  unexpended,  then  such  remainder  should 
be  added  to  the  principal,  for  accumulation,  and  bear  interest. 
On  that  same  date,  September  26,  1847,  the  interest  for  the 
year  ending  that  day  will  have  accrued,  and  that,  in  turn, 
should  be  held  for  the  support  of  the  plaintiff  for  the  year  im- 
mediately ensuing;  at  the  end  of  which — to- wit,  September  26, 
1848 — if  any  remained,  such  remainder  should  be  added  to  the 
principal,  as  an  accumulation. 

The  rule  being,  that  advances  for  support,  without  income 
in  hand,  should  bear  interest ;  advances  for  support,  with  income 
in  hand,  should  not  bear  interest;  and  the  income  becoming  due 
at  the  end  of  the  year  is  not  to  be  forthwith  invested,  or  made 
to  bear  interest,  but  may  properly  be  held  by  the  trustees,  to 
meet  the  charge  for  the  support  of  the  plaintiff  for  the  then 
coming  year ;  and  if  any  portion  thereof  remained  .at  its  end, 
such  remainder  should  then,  and  not  till  then,  be  carried  to  the 
principal,  and  bear  interest.  Assuming  the  items  correct,  as 
they  appear  in  the  account  stated  by  the  referee,  this  will  entitle 
the  defendants  to  be  credited,  in  the  years  1846,  1847,  1848, 
1849,  and  in  1859,  1864,  and  1865,  on  the  excess  of  their  pay- 
ments for  support,  over  the  amount  of  uninvested  income  in  their 
hands  at  the  beginning  of  the  year. 

I   am  aware   that   the  mode  of  keeping  the  account,  among 


IN  THE  NEW  YORK  COURT  OF  APPEALS.       337 

merchants,  is  to  charge  interest  on  both  sides  of  the  account ; 
but  the  plaintiff  insists  that  this  makes  him  pay  interest  for  his 
support,  when  the  trustees  have  income  in  hand.  The  mode  of 
stating  the  account  I  have  proposed,  is,  I  think,  literally  just 
and  exact,  and  is  not  liable  to  any  such  criticism. 

The  remaining  inquiry  is,  At  what  rate  should  interest  be 
charged?  The  view  which  I  have  taken  is  strict  in  holding  the 
defendants  to  an  exact  discharge  of  their  duty.  But  it  does  not 
forbid,  and  ought  not  to  prevent,  a  recognition  of  their  entire 
good  faith  and  perfect  rectitude  of  purpose  in  the  entire  admin- 
istration. This  is  found  by  the  court,  and  the  evidence  leaves 
no  room  to  question  their  sincerity  in  the  exercise  of  the  discre- 
tion which  they  believed  was  committed  to  them,  nor  that  they 
have  been  governed,  throughout,  by  a  desire  to  secure  and  pro- 
mote the  best  interests  of  the  infant  children  of  their  deceased 
partner  and  friend. 

With  what  is  termed  the  ungracious  aspect  of  this  prosecu- 
tion, by  those  for  whom  they  assumed  what  is  very  often  an 
irksome  and  thankless  office,  we  can  not  deal.  But  we  may  and 
ought  to  say,  that  no  imposition,  in  any  wise  in  the  nature  of  a 
penalty,  should  be  permitted. 

Where  the  failure  of  a  trustee^  in  his  duty  is  willful,  or 
characterized  by  bad  faith,  the  highest  rate  of  interest  should 
be  imposed.  But  where  good  faith  and  honest  mistake  concur, 
the  rate  of  interest  rests  in  a  discretion  that  permits  the  con- 
sideration of  all  the  circumstances  which  show  that  substantial 
justice  can  be  done  to  the  cestui  qiie  trust,  by  allowing  a  less  rate. 

Hence,  in  such  case,  we  may  not  close  our  eyes  to  the  fact, 
that  in  a  long  course  of  years,  such  as  are  now  under  consider- 
ation ,  there  are  periods  in  which  it  is  impracticable  to  realize, 
on  investments  which  give  the  requisite  assurance  of  safety,  the 
highest  interest  allowed  by  law;  that  loans  for  long  periods 
will  rarely  be  taken,  on  such  security,  at  the  highest  rate ; 
that  in  a  commercial  community,  like  our  own,  fluctuations  are 
frequent  and  large ;  and  especially  that,  in  the  management 
of  funds  of  considerable  amount,  there  must  necessarily  be  in- 
tervals when  funds  lie  idle,  seeking  investment,  notwithstanding 
all  reasonable  diligence  on  the  part  of  the  trustees. 

These   and  like  considerations  have  led  the  Court  of  Chan- 

22 


338  KING  v.  TALBOTT, 


eery  in  England  to  charge  the  executor  with  not  exceeding  four 
per  cent,  where  he  has  acted  in  good  faith,  and  has  not  himself 
realized  a  greater  profit,  the  legal  rate  of  interest  being  five  per 
cent;  and  I  think  there  is  nothing  in  Ackerman  v.  Emott,  4 
Barbour,  S.  C.  628;  Dunscomb  v.  Dunseomb,  1  Johns.  Ch.  508; 
or  Clarkson  v.  Depeyster,  Hopk.  Ch.  426,  that  forbids  their  due 
weight  in  our  decision. 

My  conclusion  on  this  point  is,  that  the  trustees  are  not 
justly  chargeable  with  more  than  six  per  cent.  That  convic- 
tion is  strengthened  by  the  fact  that  the  stocks  of  the  United 
States,  which  the  counsel  for  the  plaintiff  concedes  would  have 
been  a  proper  security,  do  not,  in  the  absence  of  the  present 
extraordinary  condition  of  our  affairs,  yield  a  higher  rate  ;  and 
it  is  at  least  doubtful  whether,  during  many  years  of  the  contin- 
uance of  this  trust,  these  stocks  could  have  been  had  without 
the  payment  of  a  premium,  Avhich  would  have  reduced  the  in- 
come still  lower. 

There  is  no  ground  for  withholding  commissions.  Even  in 
cases  of  misconduct  or  gross  negligence,  it  is  at  least  doubtful 
whether  the  settled  rule  in  this  State  would  not  require  the  al- 
lowance of  commissions ;  and,  where  no  imputation  of  this  rests 
upon  the  trustees,  their  title  to  commissions  is  in  no  doubt.  See 
Vanderlicyden  v.  Vanderlieyden,  2  Paige,  288 ;  Eapeljc  v.  Nors- 
worthy's  Executors,  1  Sandf.  Ch.  406 ;  Meacham  v.  Sterns,  9 
Paige,  405. 

It  is  not  very  material  to  notice  an  apparently  palpable  error 
in  the  judgment,  except  to  call  the  attention  of  counsel  to  it  in 
the  future.  The  account  stated  by  the  referee  contains  a  credit 
to  the  defendants  of  $128.95,  paid  for  income  tax  in  October, 
1865;  and  the  apparent  amount  to  the  credit  of  the  plaintiff  in 
that  account  ($26,964.27)  is  subject  to  abatement  for  that  pay- 
ment; and  nevertheless  the  judgment  was  entered  for  the  full 
sum  of  $26,964.27,  without  allowing  the  credit  for  that  income 
tax,  although  the  referee  had  credited  it  to  the  defendant,  he 
not  having  made  the  actual  deduction. 

The  decree  herein  should  be  modified  to  conform  to  the  fore- 
going views,  with  a  direction  to  state  the  account  accordingly  ; 
and  in  other  respects  it  should  be  affirmed,  without  costs,  on 
this  appeal. 


IN  THE  SUPREME  COURT  OF  OHIO. 


The  same  principles  should  govern  the  disposition  of  the 
other  two  cases:  Anna  Henrietta  King,  respondent,  v.  The 
Same,  appellants;  and  Charlotte  E.  King,  executrix,  ct  al}  re- 
spondent, v.  The  Same,  appellants. 

I  do  not  understand  that  any  other  questions  are  involved  in 
them,  which  are  not  considered  in  the  foregoing  opinion. 

All  the  judges  concur  in  the  result  to  which  Judge  WOOD- 
RUFF arrived. 

MURRAY,  J.,  thought  it  a  settled  principle  of  law,  in  this 
State,  that  a  trustee,  holding  trust  funds  for  investment  for  the 
benefit  of  minor  children,  must  invest  in  Government  or  real- 
estate  securities,  and  that  any  other  investment  would  be  a 
breach  of  duty,  and  the  trustee  would  be  personally  liable  for 
any  loss.  GROVER,  DANIELS,  and  JAMES,  J.  J.,  concurred. 
HUNT,  C.  J.,  MASON,  and  LOTT,  J.  J.,  contra. 

LOTT,  J.,  was  inclined  to  the  opinion  that  the  interest  should 
be  but  five  per  cent,  with  annual  rests,  upon  the  principle  sug- 
gested in  Williamson  v.  Williamson,  6  Paige,  306. 

DECREES  AFFIRMED,  with  the  modifications  indicated  in  the 
opinion  of  WOODRUFF,  J.,  without  costs  of  appeal. 


THE  BOARD  OF  EDUCATION  OF  THE  INCORPORATED  VILLAGE 
OF  VAN  WERT  v.  THE  INHABITANTS  OF  SAID  TOWN  AND  C. 
P.  EDSON  AND  P. 


[Decided  at  the  December  term,  1868,  of  the  Supreme  Court  of  Ohio, 
Judge  JOSIAH  SCOTT,  delivering  the  opinion  of  the  Court.  Reported  in  18 
Ohio  State,  221.] 

The  incorporated  village  of  Van  Wert  was  laid  out  in  1835,  and  the  proprietors, 
by  plat  duly  acknowleged  and  recorded,  dedicated  two  specified  lots  therein 
"for  school  purposes,  and  on  which  to  erect  school-houses."  By  reason  of 
the  subsequent  construction  and  continued  operation  of  a  railroad,  and  the 
location  of  a  depot  in  connection  therewith,  in  close  proximity  to  these  lots, 
they  were  rendered  unsuitable  to  be  used  as  sites  for  school-houses,  and  their 
use  for  that  purpose  became  dangerous.  A  petition  was  filed  by  the  Board 
of  Education  of  the  incorporated  village,  praying,  for  the  reason  aforesaid, 
that  the  Court  of  Common  Pleas  might  order  the  lots  to  be  sold,  and  the  pro- 
ceeds of  sale  to  be  applied  to  the  purchase  of  suitable  school-house  sites,  or 


340        BOARD  OF  EDUCATION  v.  VAN  WERT, 

to  the  erection  of  school-houses  on  suitable  grounds  to  be  procured  by  the 
Board.  Upon  demurrer  to  the  petition — held: 

That  the  dedication  was  for  a  specific  use,  and  conferred  no  power  of  alienation 
so  as  to  extinguish  the  use. 

That  if  the  use  created  by  the  dedication  were  abandoned,  or  should  become  im- 
possible of  execution,  the  premises  would  revert  to  the  dedicators  or  their 
representatives,  and  that,  without  their  consent,  they  could  not  be  divested 
of  their  contingent  right  of  reversion  by  an  absolute  alienation. 

The  principle  upon  which  a  trust  may,  under  certain  circumstances,  be  executed 
cy-pres  is  not  applicable  to  such  a  case. 

APPEAL.  Reserved  in  the  District  Court  of  Van  Wert 
County.  The  case  is  sufficiently  stated,  in  the  opinion  of  the 
court. 

It.  C.  Spears^  for  demurrants.    A.  G.  Thurman,  for  plaintiffs 

SCOTT,  J. :  This  cause  originated  in  the  Court  of  Common 
Pleas  of  Van  Wert  County,  in  which  the  plaintiff,  by  petition 
filed  February  12,  1866,  alleges  in  substance: 

That  the  original  proprietors  of  the  village  of  Van  Wert,  by 
a  town  plat  duly  acknowledged  and  recorded  in  May,  1835, 
dedicated  two  town  lots,  numbered  3  and  1  8  on  said  plat,  "  for 
school  purposes  and  on  which  to  erect  school-houses." 

That  the  proper  authorities,  shortly  afterward,  erected  a 
school-house  on  one  of  said  lots,  and  occupied  the  same,  in  con- 
formity with  the  purposes  of  said  dedication,  till  the  year  1855, 
the  limited  population  prior  to  that  time  not  requiring  a  similar 
occupancy  of  the  other  lot ;  that  the  only  means  of  access  to 
said  lots  is  from  Jackson  Street;  and  that  in  1855  the  said  street 
was  occupied  by  a  railroad  company  as  a  part  of  the  line  of  its 
railway ;  and  that  said  company  constructed  a  depot  in  close 
proximity  to  said  lots,  and  thereby  rendered  them  worthless  as 
sites  for  school-buildings,  as  the  noise  and  danger  incident  to  the 
running  of  trains  rendered  their  use  for  such  purpose  inconve- 
nient and  dangerous. 

That  the  increase  of  population  and  the  wants  of  the  village 
had,  by  this  time,  rendered  it  necessary  to  erect  additional 
school-buildings,  and  to  procure  other  and  different  sites  there- 
for, as  said  lots  had  been  rendered  unsuitable  for  the  purpose, 
by  reason  of  the  location  and  use  of  said  road  and  depot;  and 
that  such  other  sites  have  been  accordingly  purchased,  and 
buildings  erected  thereon. 


IN  THE  SUPREME  COURT  OF  OHIO.  341 

That,  to  meet  the  growing  wants  of  the  village,  it  has  become 
necessary  to  procure  still  farther  grounds  for  sites,  and  erect 
additional  school-buildings  thereon ;  and,  under  the  circum- 
stances, the  plaintiff  asks  for  authority  to  sell  said  lots  (3  and 
18),  and  apply  the  proceeds  of  sale  to  the  purchase  of  sites  for 
additional  school-buildings  or  for  the  erection  of  such  buildings. 

Edson  and  DePuy  are  made  parties  defendant,  on  the  ground 
that  they  claim  a  title  to  the  premises  adverse  to  the  plaintiff, 
which  they  are  called  on  to  disclose. 

Edson  and  DePuy  demurred  to  the  petition  on  the  general 
ground  that  it  does  not  state  facts  sufficient  to  constitute  a  cause 
of  action. 

The  inhabitants  of  the  village  of  Van  Wert  are  made  parties 
defendant  in  the  title  of  the  case,  but  neither  the  incorported 
village  of  Van  Wert  nor  its  inhabitants  have  answered  or  de- 
murred ;  nor  do  we  find  that  they,  or  either  of  them,  have  been 
brought  into  court  by  service  of  process  or  otherwise. 

The  Court  of  Common  Pleas  sustained  the  demurrer  and  dis- 
missed the  petition ;  the  plaintiff  appealed  to  the  District  Court, 
in  which  the  case  was  reserved  for  the  decision  of  this  Court. 

It  is  claimed  for  the  plaintiff  that  the  title  to  the  lots  in 
question  is  vested  in  the  plaintiff  by  section  3  of  the  act  of 
March  13,  1850.  (S.  &  C.  1377.)  That  section  is  as  follows: 
"  The  title  to  all  real  estate  and  other  property,  belonging,  for 
school  purposes,  to  any  city,  town,  village,  township,  or  district, 
or  to  any  part  of  the  same,  which  is  or  may  be  organized  into 
a  single  school  district,  in  accordance  with  this  act,  or  the  act 
to  which  this  is  an  amendment,  shall  be  regarded  in  law  as 
vested  in  the  Board  of  Education  thereof,  for  the  support  and  use 
of  the  public  schools  therein ;  and  said  Board  may  dispose  of, 
sell,  and  convey  said  real  estate,  or  any  part  of  the  same,  by 
deed?  to  be  executed  by  the  president  of  said  Board,  upon 
a  majority  vote  for  such  sale,  at  any  regular  meeting  of  the 
electors  of  said  district." 

It  does  not  appear  that  the  village  of  Van  Wert  is  organized 
into  a  single  school  district,  under  the  acts  referred  to,  nor  does 
the  petition  state  that  a  sale  has  been  voted  for  at  a  regular 
meeting  of  the  electors  of  such  district.  And  if  such  organiza- 
tion and  vote  be  assumed,  and  the  beneficial  ownership  of  the 


342  BOARD   OF  EDUCATION   ».  VAN  WERT, 

lots  by  the  village  be  regarded  as  absolute  and  unqualified,  we 
do  not  see  that,  as  against  the  village,  the  plaintiff  needs  any 
further  power  than  is  conferred  by  this  section  of  the  statute ; 
and  we  know  no  authority  vested  in  the  courts  of  the  State  to 
grant  further  power,  if  the  legislative  grant  be  insufficient. 

But  we  think  it  clear  that  this  statute  was  intended  to  ap- 
ply only  to  cases  where  the  absolute  ownership  of  the  property 
is  in  the  city,  town,  etc.,  which  has  been  organized  into  a  single 
school  district,  under  the  act  of  February  21,  1849,  and  that  it 
was  not  intended  to  affect  any  interest  of  the  original  proprie- 
tors of  towns  growing  out  of  their  dedication  of  particular  lots  or 
lands,  for  specific  uses.  The  Legislature  could  not  thus  transfer 
private  rights  of  property,  nor  change  the  character  of  the  use 
created  by  such  previous  dedications.  Le  Clercy  v.  Town  of  Gal- 
lipolis,  7  Ohio,  part  1,  217. 

By  the  8th  section  of  the  act  of  March  3,  1831,  to  provide 
for  the  recording  of  town  plats  (S.  &  C.  1484),  it  is  provided: 
"That  the  plat  or  map,  when  recorded  as  required  by  this  act, 
shall  be  deemed  and  considered  in  law,  a  sufficient  conveyance 
t,o  vest  the  fee  simple  of  all  such  parcel  or  parcels  of  land  as  are 
therein  expressed,  named,  or  intended  for  public  use,  in  the 
county  in  which  the  town  is  situated,  for  the  uses  and  purposes 
therein  named,  expressed,  or  intended,  and  for  no  other  use  or 
purpose  whatever." 

The  town  plat,  in  this  case,  was  executed  and  recorded  in 
1 835,  and  the  result  was  that  the  fee  simple  of  the  lots  in  ques- 
tion was  thereupon  vested  in  the  county  of  Van  Wert,  but 
wholly  in  trust,  for  the  public  use  specified  in  the  dedication, 
and  for  no  other  use  or  purpose  whatever. 

"If  subsequent  legislation  has  changed  the  trustee,  the  trust 
or  use  itself  remains  unchanged.  The  dedication  in  this  case, 
as  stated  in  the  petition,  was  "for  school  purposes,  and  on  which 
to  erect  school-houses."  Without  determining  whether,  under 
this  dedication,  the  lots  could  properly  be  used  for  school  pur- 
poses, other  than  the  erection  of  school-houses  thereon,  it  is 
enough  to  say  that  the  dedication  is  of  the  land,  and  not  ot  its 
value  or  proceeds.  It  confers  no  power  of  alienation  discharged 
of  the  use  by  which  the  purpose  of  the  dedication  might  be 
utterly  defeated.  Should  the  sole  uses,  to  which  the  property 


IN  THE  SUPREME  COURT  OF  OHIO.  343 

lias  been  dedicated,  become  impossible  of  execution,  the  property 
would  revert  to  tlie  dedicators,  or  their  representatives,  Will- 
iams v.  The  First  Presbyterian  Society  of  Cincinnati,  1  Ohio  St. 
478  (per  Thurman  J.);  Le  Clercq  v.  The  Town  of  Gallipolis, 
supra,  (per  Lane  J.) 

Is  it  competent  for  a  court  of  equity,  without  the  consent  of 
the  dedicators,  to  extinguish  forever  this  right  of  reversion,  by 
ordering  a  sale  of  the  property,  and  assuming  to  execute  the 
trust  cy-prcs,  by  transferring  it  to  the  proceeds  of  the  sale  ? 
We  think  judicial  power  can  not  legitimately  be  so  far  extended. 

Even  if  this  could  be  done,  the  dedicators  should  certainly 
be  made  parties  to  the  proceeding ;  otherwise  their  rights  would 
be  unaffected  by  any  order  of  the  court  in  the  premises.  The 
only  defendants  served  with  process  in  this  case  are  Edson  and 
DePuy,  and  it  is  not  alleged  in  the  petition,  that  they  are  the 
assignees  of  the  dedicators,  or  in  any  Avay  claim  under  or  rep- 
resent them.  Still,  as  the  prayer  of  the  petition  is  only  for  an 
order  directing  the  sale  of  the  lots,  and  the  application  of  the 
fund  arising  therefrom ;  and  as  no  specific  relief  is  asked  as 
against  Edson  and  DePuy,  it  is  perhaps  to  be  inferred  that  the 
title  alleged  to  have  been  set  up  by  them,  is  not  adverse  to  or 
inconsistent  with  the  right  of  the  plaintiff  to  use  the  property 
pursuant  to  the  declared  purposes  of  the  dedication;  but  it  is 
adverse  only  to  the  right  which  the  plaintiff  claims  to  discharge 
the  property  from  the  specific  public  uses  contemplated  by  the 
dedicators,  and  to  convert  it  into  private  property  by  an  absolute 
alienation.  At  least  there  is  nothing  in  the  petition  to  negative 
the  idea  that  Edson  and  DePuy  claim  under  the  dedicators,  and 
we  think  their  general  right,  as  defendants,  to  demur  to  the  pe- 
tition, can  not  be  limited  by  the  mere  assumption  that  4iiey 
are  strangers  to  the  dedication.  And,  for  the  reasons  already 
indicated,  we  think  their  demurrer  must  be  sustained,  and  the 
petition  of  plaintiff  be  dismissed.  Judgment  accordingly,  (a) 

DAY,  C.  J.,  and  BRINKERHOFF,  WELCH,  and  WHITE,  J.  J., 
concurred. 

(a)  See  the  case  following,   Wensinger  v.  Alemany,  40  California,  288,  contra. 

In  Williams  v.  First  Presbyterian  Society  of  Cincinnati,  et  als,  I  Ohio  State,  478,  it 
was  held  that  a  dedication  by  the  original  proprietors  of  a  town  of  a  parcel  of  ground 
therein,  for  public  uses,  is  valid,  although  they  held  but  an  equitable  estate  in  the 


-344        BOARD  OF  EDUCATION  v.  VAN  WERT. 

premises;  and  their  trustee,  holding  but  a  naked  legal  title  for  their  use,  is  bound 
to  respect  such  dedication.  Such  dedication,  made  before  any  legislative  act  re- 
quired town  plals  to  be  recorded,  is  valid  without  such  record.  And  it  is  valid, 
although  there  were  no  grantees  in  me,  wheu  it  was  made,  capable  of  taking  the 
fee.  That  property  dedicated  to  public  uses,  without  any  provision  for  a  forfeit- 
ure, does  not  revert  to  the  dedicators  upon  a  misuser  of  it.  It  is  only  when  the 
uses  become  impossible  of  execution,  that  it  can  revert.  That  the  right  of  a 
county  or  town  to  property  thus  dedicated  may  be  barred  by  the  statute  of  limit- 
ations, or  lost  by  lapse  of  time;  and  so  may  a  right  of  the  dedicators  to  enforce 
a  specific  execution  of  the  purposes  of  the  dedication;  and  such  dedicators  have 
not,  by  mere  operation  of  law,  exclusive  of  any  provision  in  the  act  of  dedica- 
tion, a  visitorial  power.  That  where  a  trustee,  with  the  knowledge  of  his  cestui 
que  trust,  makes  a  conveyance  apparently  in  derogation  of  the  trust,  and  undis- 
turbed possession  is  held  and  improvements  made  during  a  long  period,  namely 
fifty  years,  by  the  grantee  and  those  claiming  under  him,  in  which  period  no 
claim  is  asserted  by  the  cestui  que  trust,  it  may  be  presumed  that  he,  for  a  suffi- 
cient consideration,  directed  or  acquiesced  in  the  conveyance.  That  where  a 
legal  estate-  is  granted  or  devised  to  trustees,  without  words  of  perpetuity,  upon 
trusts  of  perpetual  duration,  there  is  much  reason  and  authority  for  holding  that 
the  legal  estate,  taken  by  the  trustees,  is  commensurate  with  the  trust,  and  there- 
fore a  fee.  But  wherever  the  legal  title  goes,  upon  the  death  of  the  grantee  or 
devisee,  it  remains  charged  with  the  trust;  and  even  if  the  trustees  do  not  take 
a  fee,  yet  if  the  trust  is  oreated  by  deed,  containing  a  covenant  of  general  war- 
ranty, binding  the  grantor  and  his  heirs  forever,  such  deed  mny  operate  by  way 
of  estoppel,  to  conform  to  the  beneficiaries  of  the  trust,  the  perpetual  and  bene- 
ficial estate  in  the  land.  That  a  deed  to  certain  persons  as  "Trustees  of  the 
Presbyterian  Congregation  of  Cincinnati,  and  their  successors  forever,"  "for  the 
use,  benefit,  and  behoof  of  the  aforesaid  congregation  forever,"  there  being  then 
but  one  such  congregation,  is  not  void  for  uncertainty  as  to  the  beneficiaries  of 
the  trust,  although  they  were  not  then  incorporated. 

Whicker  v.  Hume,  7  House  of  Lords  Cases.  124:  A  testator  gave  to  trustees 
funds  to  be  applied  by  them  "according  to  their  discretion,  for  the  advancement 
and  propagation  of  education  and  learning  all  over  the  world."  Held,  that  this 
was  a  valid  charitable  bequest,  and  not.  void  for  uncertainty. 

In  Hatch  v.  Cincinnati  and  Indiana  Railroad  Company,  18  Ohio  State,  92,  it  was 
held  that,  where  a  railroad  company  resorted  to  the  form  of  an  appropriation  of 
the  body  of  a  canal,  for  the  purposes  of  a  railroad,  for  the  purpose  of  consum- 
mating an  amicable  purchase  by  the  railroad  company  from  the  canal  com  pan  y, 
of  its  easement  in  the  lands  appropriated,  and  a  railroad  was  thereupon  con- 
structed on  the  line,  and  in  the  place  of  the  canal,  it  was  not  such  an  abandon- 
ment of  the  easement  of  the  canal  company  as  would  work  its  reversion  to  the 
owner  of  the  land  in  fee  simple. 


WENSINGER  v.  ALEMANY.  345 


WENSINGER,  et  als,  v.  ALEMANY. 

[Decided  at  the  October  term,  1870,  in  the  Supreme  Court  of  California, 
yustice  WILLIAM  T.  WALLACE  delivering  the  opinion.  Reported  in  40 
California,  288.] 

A  court  of  equity  has  jurisdiction  to  decree  a  sale  of  property  held  in  trust  for 
charitable  or  religious  purposes  when,  in  its  opinion,  the  objects  of  the  trust 
would  be  more  effectually  carried  out  by  such  sale. 

A  decree  of  sale  of  property  held  in  trust  for  religious  or  charitable  purposes 
should  require  from  the  trustee  a  bond,  with  sufficient  security  to  be  ap- 
>  proved  by  the  court,  for  the  proper  application  of  the  proceeds  of  the  sale  to 
the  purposes  of  the  trust,  according  to  the  directions  of  the  decree,  and  re- 
serving the  authority  of  the  court,  upon  proper  showing,  to  require  additional 
security,  or  to  appoint  another  trustee,  if  circumstances  make  it  necessary. 

The  costs  of  litigation,  including  reasonable  fees  to  counsel,  in  a  proceeding  for 
the  sale  of  property  held  in  trust  for  religious  or  charitable  purposes,  are  a 
pi'oper  charge  on  the  trust  fund,  and  should  be  allowed  by  the  court. 

APPEAL  from  the  District  Court  of  the  Fourth  District,  city 
and  county  of  San  Francisco. 

George  Cadw&ttader,  for  appellants.  W.  H.  L.  Barnes,  for 
respondent. 

Action  brought  by  Joseph  S.  Alemany,  Eoraan  Catholic 
Archbishop  of  San  Francisco,  against  the  defendants,  members 
of  the  congregation  of  Roman  Catholic  Germans  of  the  city  of 
San  Francisco,  to  obtain  a  decree  for  the  sale  of  certain  lots,  and 
the  buildings  thereon,  including  the  Church  of  St.  Boniface,  held 
in  trust  by  him  for  the  use  of  said  congregation,  and  to  apply 
the  proceeds,  after  paying  off  the  indebtedness  of  said  congrega- 
tion, to  the  purchase  of  another  and  more  suitable  lot  and  the 
erection  thereon  of  a  suitable  church  edifice  and  other  necessary 
buildings,  and  that  the  lot  of  ground  so  purchased  shall  be  con- 
veyed to  plaintiff,  and  shall,  together  with  any  buildings  erected 
thereon,  be  held  by  him  upon  the  trusts  respecting  the  same,  in 
all  respects  as  the  premises  sought  to  be  held  have  been  hereto- 
fore held  and  enjoyed  (a). 

(a)  The  words  of  the  deed  under  which  the  church  property  was  held,  are 
these:  "The  above  described  lot,  and  any  building  or  buildings  erected  or  to  be 
erected  thereon,  be  used  and  employed  as  a  Roman  Catholic  Church  for  the  Ger- 
man congregation  of  the  city  of  San  Francisco  .  .  .  exclusively  forever." 


346  WENSINGER  v.  ALEMANY, 

Judgment  was  for  plaintiff,  in  accordance  with  the  prayer  for 
the  complaint,  authorizing  and  directing  him  to  sell  the  premises 
therein  described  for  the  best  price  that  in  his  judgment  could 
be  obtained  therefor,  but  for  not  less  than  §65,000  in  gold  coin, 
and  that  the  costs  and  disbursements  of  the  plaintiff  and  counsel 
fees,  not  exceeding  $500,  be  allowed  to  the  plaintiff  out  of 
the  trust  funds,  and  that  the  plaintiff  pay  the  costs  and  disburse- 
ments of  the  defendants. 

Defendants  moved  for  a  new  trial,  which  was  denied,  and 
this  appeal  is  taken  both  from  the  judgment  and  the  order  deny- 
ing a  new  trial.  The  other  facts  are  stated  in  the  opinion. 

WALLACE,  J.,  delivered  the  opinion  of  the  Court,  CROCKETT, 
J.  and  RHODES,  C.  J.,  concurring: 

The  principal  purpose  intended  by  the  donors  ;was  to  provide 
"a  Roman  Catholic  Church  for  the  German  congregation  of  the 
city  of  San  Francisco."  As  a  means  to  this  end  the  lot  on  Sut- 
ter  Street,  near  Montgomery,  was  selected,  and  at  the  time  of 
the  selection  it  was  suitable,  or  at  least  not  inappropriate  for  that 
purpose.  Subsequent  events,  not  then  anticipated  and  therefore 
not  expressly  provided  for  by  the  donors,  have  already  practi- 
cally defeated  the  scheme  of  the  original  donation.  Hotels  and 
business-houses  and  places  of  public  resort  have  grown  up  in 
close  proximity  to  the  property.  A  variety  of  circumstances, 
the  results  of  the  unforeseen  growth  of  a  populous  oity  beyond 
and  around  the  premises,  have,  as  found  by  the  court  below, 
rendered  this  lot  "unsuitable  as  a  site  for  an  edifice  for  religious 
worship."  These  circumstances  have,  at  the  same  time,  greatly- 
enhanced  its  value  in  the  market,  and.it  appears  that  a  sum  can 
be  obtained  for  it  which  will  be  sufficient,  after  paying  off  the 
indebtedness  of  the  church,  to  purchase  a  suitable  lot  in  the  city, 
and  erect  thereon  an  edifice  proper  for  the  accomplishment  of 
the  original  design  of  the  donation.  The  court  below  directed, 
under  these  circumstances,  a  sale  of  the  premises  and  a  re- 
investment of  the  proceeds  of  the  sale  in  furtherance  of  the 
object  of  the  trust.  We  see  no  error  in  the  general  scope  of 
the  decree.  It  can  not  be  said  to  have  displaced  or  interfered 
with  the  original  trust,  for  that,  so  far  as  the  particular  premises 
are  concerned,  had  already  been  practically  defeated  by  the  cir- 


IN  THE  SUPREME  COURT  OF  CALIFORNIA. 

curastances  before  adverted  to.  The  decree,  in  its  effect,  re- 
establishes the  trust  as  far  as  possible,  and  provides  the  only 
means  by  which  the  interest  of  the  donors  may  be  executed  arid 
carried  into  substantial  effect.  Under  these  circumstances,  how- 
ever, and  in  view  of  the  fact  that  a  large  sum  of  money  will 
come  into  possession  of  the  respondent,  which  it  will  become  his 
duty  to  expend  pursuant  to  the  directions  of  the  decree,  we 
think  the  court  below  should  have  directed  that  he  give  a  suf- 
ficient bond  to  secure  the  fund  against  possible  loss. 

It  is  therefore  ordered,  that  the  cause  be  remanded  to  the 
court  below,  with  instructions  to  modify  the  decree  by  requiring 
of  the  respondent  a  bond,  with  two  sufficient  sureties,  to  be  ap- 
proved by  the  court  below,  in  the  sum  of  $140,000,  conditioned 
for  the  faithful  application  of  the  proceeds  of  the  sale  according 
to  the  directions  of  the  decree,  and  reserving  the  authority  of 
the  court,  upon  application  of  any  party  interested,  to  execute 
a  further  bond,  if  the  insolvency  of  the  sureties  or  other  cir- 
cumstances should  require  it ;  and  its  authority,  if  circumstances 
should  make  it  necessary,  to  order  the  fund  itself  into  the  hands 
of  another  trustee  of  its  own  selection,  to  be  applied  and  ex- 
pended under  the  direction  of  the  court. 

SPRAGUE,  J.,  expressed  no  opinion.  Mr.  Justice  TEMPLE, 
being  disqualified,  did  not  sit  in  the  case. 

Upon  petition  by  appellants  for  a  modification  of  the  judg- 
ment of  this  Court,  WALLACE,  J.,  rendered  the  following  opin- 
ion, CROCKETT,  J.,  and  RHODES,  C.  J.,  concurring.  It  is  ordered, 
that  there  be  added  to  the  directions  to  the  court  below  the 
following  words  :  "  It  is  further  ordered,  that  the  costs  of  the 
litigation  in  the  cause  be  paid  out  of  the  trust  fund,  and  that  the 
court  below  allow  to  the  appellants  a  reasonable  counsel  fee,  to 
be  paid  out  of  said  trust  fund. "(a) 

(a)  See  Norman  v.  Norman,  6  Bush's  Ky.,  496,  referred  to  in'note  page  179, 
preceding. 


348— WEDDERBURN   v.  WEDDERBURN, 


WEDDERBURN  v.  WEDDERBURN. 

[Decided  in  1838,  in  the  High  Court  of  Chancery  in  England,  by  Lord 
Chancellor  COTTENHAM.  Reported  in  4  Mylne  and  Craig,  41,  S.  C.  18 
English  Chancery  Rep.  40.] 

By  articles  of  partnership,  between  three  persons,  it  was  stipulated  that,  in  case 
of  the  death  of  any  of  them,  the  partnership  should  cease  on  a  certain  sub- 
sequent day.  and  the  property  of  the  partnership  be  then  divided  between 
the  surviving  partners  and  the  executors  of  the  deceased  partner.  One  part- 
ner, by  his  will,  directed  all  his  property  to  be  converted  and  invested  for 
the  benefit  of  his  children,  and  appointed  his  copartners  his  executors,  and 
died,  leaving  his  children  all  infants.  The  two  surviving  copartners,  hav- 
ing proved  his  will,  had  the  property  of  the  partnership^valued,  and  then 
proceeded  to  continue  the  business  under  a  new  firm,  and  debited  the  new 
firm  with  the  value  of  the  testator's  share  of  the  partnership  property,  but 
did  not  otherwise  execute  the  directions  either  of  the  articles  or  of  the  will. 
Held,  that  the  transaction  must  be  treated  as  a  nullity,  so  far  as  the  chil- 
dren's interests  were  concerned. 

The  executors  of  a  testator,  who  were  also  his  surviving  partners,  and  had  con- 
tinued to  employ  his  share  of  the  partnei'ship  capital  in  trade,  held  answer- 
able for  a  proportionate  share  of  the  profits  of  the  trade,  notwithstanding 
that  the  capital  of  the  partnership,  at  the  time  of  the  testator's  decease,  con- 
sisted only  of  debts  due  the  partnership. 

Degree  of  weight  to  be  attached  to  deeds  of  release  executed  by  cestui  que  trust 
within  a  few  days  after  their  respectively  coming  of  age,  when  such  releases 
profess  to  proceed  upon  the  examination  of  complicated  accounts. 

The  bill  stated  that  an  account  had  been  made  out,  showing  that  a  certain  sum 
was  due  to  the  plaintiff,  and  it  alleged  that  the  defendants  set  up  that  ac- 
count, and  the  payment  of  the  balance,  as  a  final  settlement.  The  bill 
charged  the  contrary,  and  that  much  more  was  due  to  the  plaintiff,  as  would 
appear  if  certain  accounts  were  rendered.  A  deed  of  release  had,  in  fact, 
been  executed  by  the  plaintiff,  at  the  time  of  the  payment  of  the  balance  in 
question;  but  the  bill  made  no  mention  of  it.  As  this  deed  of  release  ac- 
knowledged the  receipt  of  certain  sums,  it  could  not  be  wholly  set  aside;  but 
the  court  was  of  opinion,  under  the  circumstances  of  the  case,  that  it.  did  not 
deprive  the  plaintiff  of  his  right  to  the  accounts  which  he  sought.  Semble, 
that  the  proper  form  of  the  decree  in  such  a  case,  is  to  declare  that  the 
plaintiff  is  entitled  to  the  accounts,  notwithstanding  the  provisions  of  the 
deed  of  release;  but  a  decree  which  directed  the  accounts,  without  noticing 
the  deed  of  release,  was  not  considered  to  require  alteration. 

Between  cestui  que  tru*t  and  trustee  no  lapse  of  time  will  preclude  the  account 
from  the  commencement  of  the  trust,  in  a  case  in  which  (lie  relation  of  trustee 
and  ceslui  que  (rust  continues — the  transactions  between  them  are  not  closed, 
and  the  delay  of  the  claim  is  attributable  to  the  trustee  not  having  given  to 


IN  THE  ENGLISH  HIGH  COURT  OF  CHANCERY.          849 

_  . — —^ 

his  ccstui  que  trust  that  information  to  which  he  was  entitled,  and  accounted 
with  him  in  such  manner  as  he  ought. 

Difficulties  of  enforcing  in  chancery  a  cestui  que  trust's  right  (however  clear)  to 
participate  in  profits  of  a  trade  carried  on  in  part  with  the  trust  fund. 

THE  facts  in  this  case,  and  the  terms  of  the  decree  made 
upon  the  hearing  at  the  Rolls,  appear  very  fully  in  the  second 
volume  of  Keen's  Reports,  722  ;  and  they  are  also  stated  by  the 
Lord  Chancellor  in  his  judgment.  The  defendants  appealed  to 
the  Lord  Chancellor  against  the  whole  decree,  except  that  part 
which  directed  the  usual  accounts  of  the  personal  estate  of  David 
Webster ;  and  the  appellants  further  submitted  that  the  decree, 
so  far  as  it  related  to  David  Webster's  estate,  was  defective,  inas- 
much as  it  did  not  direct  that,  if  in  taking  an  account  of  that 
estate,  and  of  the  administration  of  it,  the  master  should  find 
any  account  settled,  he  was  not  to  disturb  or  unravel  the  same. 

Mr.  Knight  Bruce,  Mr.  Kindersley,  and  Mr.  ColviHe,  for  ap- 
pellants. The  Solicitor-General,  Mr.  Jacob,  and  Mr.  lioe,  for 
respondents. 

The  Lord  Chancellor  COTTENHAM  :  Althougn  the  papers  in 
this  case  are  voluminous,  and  the  questions  of  great  importance, 
the  facts,  so  far  as  they  appear  to  me  necessary  to  be  considered, 
lie  in  a  narrow  compass,  and  the  points  to  be  decided  are  : 

1.  What  was  the  effect  of  the  arrangement  of  1801  ? 

2.  What  were  the  rights  of  the  plaintiffs  independently  of 
that  arrangement  ? 

3.  What  was  the  effect  of  the  several  deeds  executed  by  the 
plaintiffs  ? 

4.  What  ought  to  be  the  effect  of  the  time  that  has  elapsed  ? 

5.  If  the  plaintiffs  are  entitled  to  what  they  ask,  what  ought 
to  be  the  form  of  the  decree  ?  -»  ; 

I.  As  to  the  arrangement  of  1801,  the  facts  are  simply  these : 
The  testator,  David  Webster,  had  been  engaged  in  partnership 
with  John  Wedderburn  and  David  Wedderburn,  under  a  deed 
of  1796,  for  seven  years  from  the  1st  day  of  May,  1796,  if  the 
three  should  so  long  live,  in  which  deed  very  special  provision 
is  made  for  settling  the  account  with  the  estate  of  any  one  of  the 
partners  who  might  die  during  the  continuance  of  the  partner- 
ship. It  is  thereby  provided,  that  the  partnership  shall  be  con- 


350  WEDDERBURN  v.  WEDDERBURN, 

sidered  as  continuing  up  to  the  1st  of  May,  after  the  death  of 
any  partner ;  but  that  after  such  death,  nothing  shall  be  done  by 
the  survivors  to  prejudice  or  affect  the  estate  of  the  deceased,  or 
his  interest  in  the  joint  stock ;  that  within  three  months  from 
the  1st  of  May,  after  the  death,  the  account  between  the  sur- 
vivors aiid  the  estate  of  the  deceased  partner  shall  be  made  out, 
so  as  to  show  the  share  and  interest  of  the  deceased,  and  shall 
be  signed  by  his  executors  and  the  surviving  partners ;  that  as 
soon  as  conveniently  may  be  after  such  settlement,  all  the  debts 
due  by  the  firm  shall  be  paid,  and  that  thereupon  a  partition 
and  delivery  shall  be  made  of  all  residue  of  the  joint  property, 
including  a  partition  of  all  debts  due  to  the  firm ;  and  the  repre- 
sentatives of  the  deceased  partner  are  to  have  the  right  to  use 
the  names  of  the  survivors  to  compel  payment  of  the  debts 
assigned  to  them. 

It  appears  that  John'  Wedderburn  and  David  Webster,  who 
had  carried  on  the  business  before  David  Wedderburn  was  ad- 
mitted into  partnership  with  them,  were  possessed  of  certain 
shares  in  ships,  and  it  has  been  assumed  that  such  shares  con- 
stituted part  of  the  joint  stock  and  partnership  property ;  but  I 
do  not  find  that  to  have  been  the  case,  and,  on  the  contrary,  I 
think  it  appears  that  these  shares  were  the  separate  property  of 
each  partner,  although,  no  doubt,  the  possession  of  such  shares 
was  considered  as  beneficial  to  the  joint  trade;  and  the  deed 
therefore  provided  that  David  Wedderburn  should  purchase  one- 
sixth  share  in  the  ships  from  John  Wedderburn  and  David 
Webster,  and  that,  in  the  event  of  the  death  of  either  of  them 
during  the  copartnership,  he  should  purchase  from  the  repre- 
sentatives of  the  deceased  such  further  shares  in  the  ships  and 
other  property,  as  should  be  equal  to  his  then  share  in  the  con- 
tinuing business ;  but  those  shares  were,  as  I  collect,  registered 
in  the  names  of  the  individual  partners,  and  therefore  could  not, 
according  to  the  case  of  exparte  Yattop,  15  Ves.  GO,  be  considered 
as  part  of  the  partnership  estate,  and  I  do  not  find  that  there  was 
any  intention  that  they  should  be  so  considered. 

David  Webster  died  in  March,  1801,  and  appointed  his  wife, 
and  his  two  partners,  John  Wedderburn  and  David  Wedderburn, 
executors  of  his  will;  but  the  two  latter  alone  proved.  By  this 
will,  the  children  of  David  Webster  were  entitled  to  certain 


IN  THE  ENGLISH  HIGH  COURT  OF  CHANCERY.  351 

interests  in  his  property ;  but  I  do  not  find  that  it  contained  any 
directions  as  to  the  mode  of  settling  the  account  with  the  sur- 
viving partners.  It  however  directed  his  executors  to  convert 
his  shares  of  ships  and  other  property  into  money  as  soon  as 
might  be  after  his  decease,  and  to  invest  the  proceeds  for  the 
benefit  of  his  family.  Some  stress  was  laid,  in  argument,  upon 
the  fact  of  the  testator  having  appointed  his  partners  his  execu- 
tors ;  and  no  doubt  that  appointment  proves  the  testator's  confi- 
dence in  them,  and  in  the  prosperity  of  the  business  in  which  he 
had  been  engaged;  but  that  the  testator  should  have  been  de- 
sirous of  conferring  upon  them  that  office,  is  much  less  matter  of 
surprise  than  that  they  should  have  accepted  it,  assuming,  what 
I  see  no  reason  to  doubt,  that  they  intended  to  act  with  the 
most  perfect  honor  and  integrity  toward  the  family  of  their 
deceased  partner.  Had  the  representatives  of  the  testator  not 
been  his  surviving  partners,  their  duty  would  have  been  to  have 
followed,  as  closely  as  possible,  the  provisions  of  the  deed  and 
the  directions  of  the  will ;  and  any  settlement  they  might  have 
come  to  with  the  surviving  partners,  would  have  been  binding  ; 
but  the  union  of  the  two  characters  in  the  same  person  rendered 
any  binding  settlement  extremely  difficult.  A  strict  adherence 
to  the  provisions  of  the  deed  could  hardly  have  been  so  con- 
ducted as  to  have  excluded  future  investigation  and  inquiry; 
but  they  did  not  attempt  to  observe  those  provisions,  or  to  follow 
the  directions  of  the  will,  but  assumed  to  themselves  the  power 
and  right  of  selling  as  executors,  and  purchasing  as  partners, 
the  testator's  shares  in  the  ships,  and  in  such  of  the  debts  and 
other  property  belonging  to  the  firm  as  they  were  desirous  of 
becoming  possessed  of.  But  that  was  not  all ;  for  instead  of 
setting  apart  and  investing  the  sum  assumed  as  the  purchase- 
money,  as  directed  by  the  will,  they  kept  it  as  a  debt  due  from 
the  new  firm,  exposing  the  -property  of  the  infants  to  all  the  risks 
of  trade.  I  am  clearly  of  opinion  that  these  transactions  of 
1801  had  no  effect  whatever  in  altering  the  position  of  the  tes- 
tator's property  and  interest,  and  that  the  rights  of  his  children 
are  to  be  considered  precisely  as  they  would  have  been  if  no 
such  transaction  had  taken  place.  If  any  authority  were  re- 
quired for  this  purpose,  the  language  of  Lord  ELDOX,  in  CooJc  v. 
Collingridge,  Jacob,  607  (see  p.  621),  as  quoted  by  the  Master 


352  WEDDERBURN  v.  WEDDERBURN, 

of  the  Rolls  (see  2  Keen,  731),  would  be  amply  sufficient. 
Upon  the  first  point,  therefore,  I  entirely  concur  with  the  judg- 
ment of  the  Master  of  the  Rolls. 

II.  How  then  does  this  part  of  the  case  stand,  treating  this 
attempted  settlement  as  of  no  effect  ?      John  Wedderburn  and 
David  Wedderburn,  as  surviving  partners,  instead  of  separating  • 
the  property  of  their  deceased  partner  from  the  property  em- 
ployed in  carrying  on  the  business,  continue  to  employ  it  in  their 
own  business.     This,  according  to  Brown  v.  De  Tastct,  Jac.  284  ; 
Crawshay  v.  Collins,  15  Ves.  218  ;  1  J.  &  W.  267  ;  2  Russ.  325  ; 
Fcatlierstonliaugli  v.  Femvick,  17  Ves.  298  ;  Cook  v.  Cottingridge, 
Jac.  C07,  and  other  cases,  would  have  subjected  them  to  an  ac- 
count for  the  profits  made  thereby  ;  but,  as  personal  representa- 
tives, they,  instead   of  realizing   their  testator's   propert}T,   and 
investing  it  according  to  the  directions  of  the  will,  employ  it  in 
their  trade  and  business.     This  subjects  them,  as  executors,  to 
account  for  the  profits  thereby  made,  as  in  Docker  v.  Sonies,  2 
Mylne  &  Keen,  655.     In  each  of  the  two  characters  they  held, 
they   are  subject  to  the  account  decreed  against  them.     Upon 
this  second  point,  therefore,  there  is  not,  I  think,  any  doubt  of 
the  propriety  of  the  Master  of  the  Rolls'  decree.     It  was,  indeed, 
contended  that  there  was  no  employment  of  the  testator's  capital, 
the  capital  of  the  trade  consisting  only  of  debts  due ;  but  why 
were  they  not  called  in,  but  for  the  interest  of  the  survivors, 
and  what  enabled  them  to  give  the  credit  but  the  capital  of  the 
testator  ? 

III.  The  effect  of  the  deeds  executed  by  the  children  is  next 
to  be  considered,  and  first  in  date  that  executed  in  1809,  by  the 
plaintiff,  Sir  James  Webster   Wedderburn.      It  is,   in   the    first 
place,  to  be  observed  that  the  appeal  is  against  so  much  of  the 
decree  only  as  directs  accounts  to  be  taken  of  the  transactions 
of  the  several  partnerships,   except  that   it   complains  that  the 
decree   does  not  direct   that   if,  in  taking  the   accounts  of  and 
relating  to  the  personal  estate  of  the  testator  and  the  adminis-  ' 
tration    thereof,  the  master  should  find  any  account  stated,  he 
was  not  to    disturb  or  unravel  the   same.      The    direction  thus 
suggested  is  not,  as  I  conceive,  adapted  to  the  facts  of  this  case, 
in  which  an  account  alleged  to  be  a  settled  account,  that  is,  the 
account  indorsed  upon  the  deed,  is  put  in  issue  and  proved  in 


IN  THE  ENGLISH  HIGH  COURT  OF  CHANCERY.          353 

the  cause.  It  is  in  such  cases  for  the  court  to  direct  what  shall 
be  the  effect  of  such  an  account,  and  not  to  leave  that  question 
to  the  master.  Except  as  to  this  point,  the  appeal  would  appear 
to  be  the  appeal  of  the  partners  in  the  successive  firms,  and  to 
complain  only  of  the  decree  so  far  as  it  directed  an  account  of 
the  profits;  but  the  deed  of  1809  is  not  between  Sir  Jame& 
Wedderburn  and  any  other  as  partner  in  the  business,  but  be- 
tween him  and  the  late  John  Wedderburn,  as  executor  of  James 
Webster,  whose  estate  is  not  in  question  upon  this  appeal,  and 
as  one  of  the  executors  of  David  Webster,  the  testator ;  and 
that  deed  takes  no  notice  of  any  claim  the  plaintiff  might  have 
against  the  continuing  or  succeeding  partners  in  the  business,  but 
deals  only  with  the  liability  of  John  Wedderburn  as  personal 
representative  ;  nor  does  it  profess  to  state  or  settle  any  account 
of  the  personal  estate  of  David  Webster,  but  reciting  that  the 
residue  of  such  personal  estate,  after  payment  of  debts,  was 
considered  or  supposed  to  amount  to  75,068?.,  upon  the  account 
made  up  and  indorsed  on  the  31st  of  May,  1809;  and  that  de- 
ducting what  had  been  advanced  to  Sir  James  Wedderburn,  the 
balance  apparently  due  to  him  from  the  estate  of  the  testator 
was  11,399?.,  and  reciting  that  a  considerable  part  of  the  estate 
of  the  testator  consisted  of  his  share  of  a  debt  due  from  the 
estate  of  James  Webster,  of  which  John  Wedderburn  was  exec- 
utor and  beneficial  owner.  John  Wedderburn  undertakes  to  pay 
this  apparent  balance  by  installments,  in  consideration  of  which 
the  plaintiff,  Sir  James  Wedderburn,  declares  himself  satisfied 
with  the  disclosure  thus  far  made,  and  accounts  thus  far  given, 
of  the  personal  estate  of  David  Webster,  and  of  the  said  princi- 
pal sum  or  balance  of  11,399?.,  being  justly  due  to  him  from  the 
same  estate  under  the  will  of  David  Webster;  and  that  he, 
John  Wedderburn,  making  the  payments  as  agreed,  he,  the 
plaintiff,  would  not  require  payment  from  him  or  from  the  other 
executor  of  David  Webster,  of  the  sums  so  agreed  to  be  paid 
to  him ;  but  it  is  expressly  provided  that  the  deed  and  the  agree- 
ment therein  contained  shall  be  understood  as  applying  only  to 
the  account  and  state  of  things  on  the  1st  of  May,  1800,  as 
then  accounted  for,  and  as  not  precluding  him  from  claiming 
any  further  part,  share,  or  personal  estate,  or  sum  of  money, 

23 


354          WEDDERBURN  v.  WEDDERBURN, 

under  the  will  of  David  Webster,  not  as  yet  received,  fallen  in, 
or  accounted  for. 

The  accounts  scheduled  are  of  debts  due  to  and  from  the 
firm  of  Webster,  Wedderburn  &  Co.,  on  the  1st  of  May,  1801, 
and  speculative  calculations  as  to  the  amount  of  Sir  James  Wed- 
derburn's  share  in  his  father's  property  upon  various  supposi- 
tions. So  far  as  this  deed  is  relied  upon  as  excluding  an  account 
of  the  profits  of  the  trade,  or  which  have  arisen  from  the  use  of 
the  testator's  estate,  it  would  be  a  sufficient  answer  that  the 
profits  so  claimed  consist  of  sums  of  money  not  accounted  for 
in  the  account  scheduled  to  that  deed.  But  in  fact  that  deed  is 
not  any  settlement  of  any  account,  but  only  provides  the  means 
of  paying  an  estimated  and  speculative  balance  in  a  manner 
most  advantageous  to  the  accounting  party.  That  deed,  there- 
fore, can  not,  I  think,  operate  as  any  bar  to  the  account  decreed. 

The  next  deed  is  of  the  29th  of  August,  1812,  executed  by 
one  of  the  daughters,  Miss  Anne  Webster.  It  is  in  most  respects 
the  same  as  the  other,  but  it  contains  additional  proof  that  there 
was  no  intention  of  settling  any  general  account  of  the  personal 
estate,  and  certainly  not  of  the  profits  of  the  trade,  because  it 
does  contain  a  release  as  to  a  certain  sum  invested  and  as  to 
sums  extended  for  the'  benefit  of  Miss  Anne  Webster,  but  the 
release  is  expressly  confined  to  those  two  objects.  There  is  also 
indorsed  upon  this  deed  an  account  of  receipts  and  payments  on 
account  of  the  personal  estate  from  1809  to  1812,  and  that  ac- 
count may  be  prima  facie  evidence  of  the  items  it  contained, 
but  it  can  not  be  treated  as  a  binding  account,  the  deed  itself 
providing  that  it  should  not  preclude  any  claim  in  respect  of 
moneys  or  personal  estate  not  accounted  for. 

The  next  deed  is  of  the  year  1813,  and  executed  by  the 
daughter  Mary,  afterward  Mrs.  Hawkins.  It  is  in  all  re- 
spects similar  to  the  last,  and  subject,  therefore,  to  the  same 
observations. 

The  last,  and,  in  point  of  form,  the  most  important  of  these 
deeds,  is  that  executed  by  the  plaintiff,  Charles  Wedderburn 
Webster,  dated  the  13th  of  September,  1820.  It  purports  to 
release  John  Wedderburn  and  Sir  David  Wedderburn  from  all 
demands  on  account  of  the  personal  estate  of  the  testator,  David 
Webster,  in  the  most  general  terms ;  and  it  recites  that  there 


IN  THE  ENGLISH  HIGH  COURT  OF  CHANCERY.          355 

had  been  submitted  to  him  (Charles  W.  Webster)  accounts  of 
the  said  personal  estate,  and  of  all  the  receipts  and  payments 
respecting  his  expectant  share  thereof,  all  which  he  had  exam- 
ined and  approved,  and  found,  upon  such  examination,  that  his 
share  of  the  testatoi''s  estate  consisted  of  29,160?.  three  per 
cents,  and  certain  other  sums  of  money  specified ;  and  it  recites 
that  he  (Charles  W.  Webster)  had  attained  twenty-one  on  the 
10th  of  that  month  ;  and  that  this  investigation  of  the  accounts 
had  taken  place  since.  No  accounts  are  attached  to  the  deed, 
or  proved  in  the  cause,  as  being  the  accounts  referred  to.  The 
Master  of  the  Rolls  refers  to  an  account  marked  No.  11  D., 
which  he  supposes  to  have  been  the  account  referred  to,  but  I 
do  not  find  any  evidence  of  that  fact.  In  the  absence  of  all 
proof  to  the  contrary,  I  must  assume  that  the  mode  adopted  upon 
all  the  former  occasions  of  stating  the  account  was  followed  upon 
this ;  and  that  the  calculation  proceeded  upon  the  statement 
made  in  1809  ;  and  if  so,  it  is  impossible  that  such  a  statement 
could  bind  the  infant.  If  there  had  been  any  such  investigation 
of  the  accounts  as  could  have  made  the  release  binding,  the  de- 
fendants might  have  proved  it.  But  though  the  transaction  is 
impeached,  they  do  nothing  but  produce  the  instrument  itself, 
which,  upon  the  face  of  it,  purports  to  be  a  release,  on  the  third 
day  after  the  infant  attained  twenty-one,  of  the  result  of  an  ac- 
count extremely  complicated  in  its  nature,  and  of  the  transac- 
tions of  very  many  years  (as  it  must  have  included  th^  unsettled 
partnership  accounts  before  the  death  of  the  testator  in  1801), 
upon  the  alleged  investigation  by  the  infant  within  two  days, 
and  of  which  account  no  evidence  is  given.  It  can  not  be 
seriously  questioned  whether  the  infant  can  be  bound  by  such 
an  instrument  under  such  evidence  (a).  It  is,  indeed,  incon- 

(a)"I  take  it  to  be  settled,  that  where  a  release  is  obtained  upon  a  ward's 
freshly  arriving  of  age,  the  whole  burthen  is  cast  upon  the  guardian  of  proving 
every  thing  essential  to  make  the  release  a  valid  discharge;  and  nothing  is  more 
essential  than  a  full,  entire,  and  minute  account.  The  doctrine  of  a  court  of 
equity  upon  this  subject  is  an  instance  of  the  wise  flexibility  of  its  rules,  for  the 
preservation  of  rights.  In  a  court  of  law,  the  moment  of  emancipation  from  the 
legal  privilege,  is  the  moment  of  absolute  power  and  of  unlimited  capacity.  This 
Court  extends  its  watchfulness  further,  and  requires  that  a  discharge  to  the 
guardian  shall  not  be  precipitated;  that  ample  time  shall  be  allowed  for  consul- 
tation and  inquiry ;  that  there  shall  be  a  full  exhibition  of  the  estate,  and  of  its 
administration;  and  it  requires  that  a  guardian  who  settles  his  account  in  secret, 


356  WEDDERBURN  v.  WEDDERBURN, 

sistent  with  the  whole  of  the  case  now  made  by  the  defend- 
ants, that  any  such  accounts  should  have  been  rendered  as  could 
alone  make  any  settlement  binding,  the  defendants  having  always 
disputed  the  right  of  the  plaintiffs  to  any  investigation  of  the 
subsequent  transactions  of  the  trade. 

It  was  then  argued  that  this  release  by  Charles  Wedderburn 
Webster,  however  liable  to  be  impeached,  is  binding  till  set  aside, 
and  that  the  bill  does  not  pray  any  such  relief.  If  this  objection 
should  prevail,  it  would  affect  the  share  of  Charles  only  ;  and  if 
the  court  had  found  itself  compelled  to  yield  to  the  objection,  it 
would  not  have  permitted  the  real  justice  of  the  case  to  be 
defeated,  but  would  have  enabled  Charles  Wedderburn  Webster 
to  renew  his  demand  in  another  shape ;  but  although  there  is 
some  difficulty  as  to  the  form  in  which  the  case  has  been  brought 
forward,  I  do  not  think  that  the  objection  oiight  to  prevail 
against  even  the  claim  of  Charles.  The  bill  takes  no  notice  of 
the  deed,  but  it  states  that  an  account  was  made  out  of  Charles's 
share,  showing  that  13,0857.  was  the  sum  due  to  him,  and 
charges  that  much  more  was  due ;  and  it  then  states  that  the 
defendant  set  up  the  settlement  of  the  account  and  payment  of 
the  balance  upon  Charles's  attaining  twenty-one,  and  charges 
the  contrary,  and  that  he  and  the  other  children  are  entitled  to 
other  large  sums,  as  would  appear  if  accounts  were  rendered  of 
the  profits.  The  defendants,  by  their  answer,  state  the  deed,  but 
dispute  the  claim  to  an  account  of  the  profits  to  which  the  deed 
does  not  profess  to  relate.  I  am  of  opinion  that,  under  these 
circumstances,  the  deed  and  the  settlement  which  it  is  alleged 
to  include,  being  in  issue,  and  the  latter  impeached,  it  was  com- 
petent for  the  court  to  decree  the  relief  it  found  the  plaintiff  to 
be  entitled  to,  being  of  opinion  that  the  title  to  such  relief  was 
not  precluded  by  that  deed.  The  decree  might,  in  terms,  have 
decreed  the  account,  notwithstanding  the  provisions  of  that  deed  ; 

shall  be  prepared  to  prove  that  he  has  fully  complied  with  those  requisitions, 
unless  he  can  shelter  himself  under  a  positive  ratification — a  deliberate,  intelli- 
gent, voluntary  acquiescence;  or  such  a  flow  of  time  as  will  induce  the  court  to 
refuse  its  interposition."  HOFFMAN,  Ass't  V.  C.,  Fish  v.  Miller,  1  Hoff.  Ch.  Rep. 
270.  Whether  it  be  tKe  case  of  a  ward,  as  between  him  and  his  guardian,  or 
any  other  person  who  has  just  attained  years  of  maturity,  and  those  who  have 
had  the  management  of  his  estate,  as  trustees,  or  however  otherwise,  mutalo  nom- 
int,  the  principle  is  still  the  same — Note  to  the  report  in  18  Eng.  Ch.  Reports. 


IN  THE  ENGLISH  HIGH  COURT  OF  CHANCERY.  357 

and  this  would  perhaps  have  been  the  most  correct  form,  because 
the  deed  could  not  have  been  wholly  set  aside  without  injustice 
to  the  defendants,  as  it  will  still  be  evidence  against  Charles 
Wedderburn  Webster  of  the  payments  therein  acknowledged  to 
have  been  received,  though  treated  as  ineffectual  for  the  purpose 
of  precluding  the  account;  and,  looking  at  the  pleadings  and 
the  decree  together,  I  think  that  this  is,  in  effect,  the  result,  and 
that  no  alteration  in  the  decree  upon  that  point  is  necessary.  I 
therefore  agree  with  the  Master  of  the  Rolls  upon  this  point  also. 

IV.  If,  then,  the  plaintiffs  were  originally  entitled  to  the 
account' prayed,  and  if  they  had  not  in  fact  released  such  title, 
are  they  precluded  from  asserting  it  by  the  time  that  has  elapsed  ? 

The  case  is  one  of  trust.  No  presumption  of  payment  or  satis- 
faction or  waiver  can  arise,  because  the  title  is  in  dispute  at  this 
moment,  and  the  facts  upon  which  the  plaintiffs'  title  depends 
were  not  made  known  to  them,  and  although  the  commencement 
of  the  transaction  is  of  an  early  date,  and  one  of  the  plaintiffs  at- 
tained twenty-one  in  1809,  and  the  youngest  in  1820,  yet  the 
transactions  have  never  terminated  or  the  accounts  been  finally 
closed.  This  appears  from  all  the  accounts  rendered,  all  proceed- 
ing upon  calculations  of  uncertain  dependencies.  No  case  has, 
under  such  circumstances,  considered  time  as  precluding  the  ac- 
count from  the  commencement ;  namely,  when  the  situation  of 
trustee  and  cestui  que  trust  has  continued,  the  transactions  be- 
tween them  not  closed,  and  the  delay  of  the  claim  attributable  to 
the  trustee  not  having  given  that  information  to  his  cestui  que 
trust  to  which  he  was  entitled,  and  accounted  with  him  in  such  a 
manner  as  the  court  is  of  opinion  he  ought  to  have  done.  This 
is  not  the  case  of  an  attempt  to  raise  a  constructive  trust  upon 
transactions  closed  many  years  before,  but  of  a  direct  trust,  of 
which  the  transactions  are  not  closed. 

In  Beaumont  v.  Boultbee,  5  Ves.  485,  an  account  was  di- 
rected in  1800,  which  would  commence  in  1760.  In  Toivnsend 
v.  Townsend,  1  Cox,  28  (see  page  34);  in  BecJcford  v.  Wade,  17 
Ves.  87  (see  page  97);  and  Gregory  v.  Gregory,  Sir  Or.  Coop. 
201,  this  distinction  is  taken;  and  in  Chalmer  v.  Bradley,  1  Jac. 
&  W.  51  (see  pp.  67  and  69),  Sir  THOMAS  PLUMER  not  only 
recognized  it,  but,  forty-five  years  after  the  testator's  death, 
directed  inquiries,  with  the  view,  if  they  should  prove  favor- 


358  WEDDERBURN  v.  WEDDERBURN, 

able  to  the  claim  of  the  cestui  que  trust,  to  afford  him  some 
relief.  In  this  case  the  same  necessity  for  previous  inquiry  does 
not  exist. 

V.  The  form  of  the  decree  only  remains  to  be  considered, 
and  upon  this  point  I  have  felt  some  difficulty,  arising  princi- 
pally from  the  impression  I  have  that  the  testator's  shares  in  the 
'ships  ntust  be  considered  as  part  of  his  private  property,  and 
not  as  part  of  the  joint  partnership  stock,  and  the  doubt,  there- 
fore, whether  any  direction  in  the  decree  would  meet  this  part 
of  the  case.  The  Master  of  the  Rolls  seems  to  have  thought 
that  the  purchase  of  these  shares  by  the  executors  was  not 
effectually  impeached  by  the  bill ;  and,  certainly,  if  it  shall  ap- 
pear to  be  for  the  interest  of  the  plaintiffs  to  take  the  amount  of 
the  valuation  of  those  shares  instead  of  the  shares  themselves, 
the  defendants,  the  executors,  can  not  decline^  so  to  account ; 
but  I  do  not  think  that  the  present  is  the  stage  of  the  cause  in 
which  that  is  to  b«  determined,  and  I  think  that  the  decree,  as 
it  stands,  will  produce  all  such  information  as  may  be  necessary 
to  dispose  of  this  question  upon  further  directions,  for  it  directs 
the  master  to  take  the  usual  accounts  of  the  personal  estate,  and 
he  is  to  be  at  liberty  to  state  any  circumstances  specially  as  he 
may  think  fit.  The  report,  therefore,  will  no  doubt  bring  for- 
ward all  the  necessary  information ;  and  as  the  plaintiffs  have 
not  complained  of  the  decree,  there  might  be  some  difficulty  in 
altering  this  part  of  it. 

As  to  the  parts  of  the  decree  which  are  subject  of  the  ap- 
peal, I  think  that  they  are  well  calculated  to  do  justice  between 
the  parties.  The  account  of  partnership  transactions  up  to  May, 
1801,  is  quite  of  course,  supposing  no  settlement  of  that  account 
to  be  binding  upon  the  plaintiffs ;  and,  as  the  whole  case  pro- 
ceeds upon  the  assumption  that  the  subsequent  trade  was  carried 
on  in  part  with  the  testator's  capital,  which  gives  to  the  plain- 
tiffs a  right  to  participate  in  the  profits  of  it,  if  it  shall  appear 
to  be  their  interest  to  claim  it,  the  inquiry  directed  as  to  the 
profits  made  is,  I  think,  a  necessary  preliminary  to  any  decree, 
adjudicating  in  what  manner  and  to  what  extent  the  participa- 
tion of  the  plaintiffs  in  such  profits  ought  to  be  provided  for; 
and  the  amount  of  capital  employed  in  such  trade  is  a  neces- 
sary part  of  such  inquiry.  I  consider  all  these  directions  and 


KEYSER  v.  MITCHELL.  " -359  — 


inquiries  as  preliminary  steps  only  to  the  final  adjudication  upon 
the  rights  of  the  parties,  and  I  think  that  the  plaintiffs  have 
made  out  their  title  to  such  inquiries. 

I  have  had  many  occasions  to  consider,  and  have  frequently 
expressed  my  sense  of  the  difficulties  which  the  Court  has  to 
encounter  in  administering  equity  according  to  its  acknowledged 
principles  in  cases  of  this  description.  So  many  decisions  have 
established  the  right  of  parties  to  participate  in  the  profits  of 
trade  carried  on  under  circumstances  similar  to  the  present,  that 
no  question  can  be  raised  as  to  the  duty  of  the  Court  in  decree- 
ing such  relief  when  a  proper  case  arises  for  it ;  but  it  is  obvious 
that  very  great  difficulties  exist  in  enforcing  this  right.  Great 
expense,  great  delay,  and  great  hardship  upon  the  defendants 
frequently  attend  the  prosecution  of  decrees  for  this  purpose, 
and  the  apparent  benefit  decreed  to  the  plaintiff  is  frequently 
much  diminished,  if  not  lost,  in  the  attempt  to  enforce  it. 

This  case  again  came  before  the  Court,  but  upon  a  totally 
different  point,  2  Beavan,  208. 


KEYSER  v.  MITCHELL,  et  als,  GARNISHEES. 

\Decided  in  the  Supreme  Court  of  Pennsylvania,  February  10,  1871, 
before  THOMPSON,  C.  J.,  SHARSWOOD  and  WILLIAMS,}.  J.  READ,}.,  at  Nisi 
Prius.  Reported  in  67  Pennsylvania  State  (17  P.  F.  Smith),  473.] 

A-  testator  devised  to  trustees  to  collect,  etc.,  rents  and  income,  and  "  pay  said 
income,  etc.,  or  so  much  as  the  trustees  may  thkik  proper,  etc.,  under  all  the 
circumstances  of  the  case,  for  the  support  and  maintenance  of  my  son  Charles 
during  his  life,  with  the  intent  and  purpose  that  the  said  trustees  may  either 
pay  the  said  income,  or  such  portion  thereof  as  they  may  think  proper,  into 
the  hands  of  my  said  son.  or  disburse  the  same  in  such  way  as  to  the  said 
trustees  may  seem  best  for  his  comfortable  support  and  maintenance,  such 
payments  and  disbursements  to  be  at  all  times  at  the  sole  and  absolute  dis- 
cretion of  the  said  trustees."  Held,  that  the  income  was  not  liable  to  attach- 
ment under  a  judgment  against  the  son. 

The  income  was  payable  to  the  son  at  the  discretion  of  the  trustees.  Until  the 
discretion  was  exercised,  the  son  had  nothing. 

In  such  case,  chancery  will  not  interfere  to  control  the  trustees'  discretion.  To 
subject  the  income  to  au  execution  would  end  the  trustees'  discretion  and 
defeat  the  testator's  intent.  This  form  of  guarding  the  trust  and  the  income 
from  the  prodigality  of  the  son  is  as  effectual  as  aVi  express  exclusion  of  the 
creditors  by  the  will.  Girard  Life  Insurance  and  Trust  Company  v.  Chambers, 
10  Wright,  485,  distinguished. 


360  KEYSER  v.  MITCHELL, 


ERROR  TO  THE  DISTRICT  COURT  OF  PHILADELPHIA. 

THIS  was  an  attachment  execution,  issued  October  1,  1869, 
by  Edmund  Keyser,  against  Charles  Nicholas,  defendant,  and 
Thomas  Mitchell  and  John  C.  Mitchell,  and  George  P.  Russell 
and  David  C.  Landis,  trading  as  Russell  &  Landis,  garnishees. 
There  was  no  service  on  the  defendant  or  on  John  C.  Mitchell, 
one  of  the  garnishees. 

L.  Hirst  and  R.  C.  WMurtrie,  for  plaintiffs  in  error.  F. 
Mitchel,  for  defendants  in  error. 

THOMPSON,  C.  J.,  delivered  the  opinion  of  the  Court :  The 
question  in  this  case  is,  whether  the  income  of  the  trust  created 
for  the  benefit  of  Charles  Nicholas,  the  defendant,  by  the  will  of 
his  mother,  was  attachable  in  the  hands  of  his  trustee  for  debts 
contracted  by  him  without  the  consent  of  the  trustee !  We 
have  but  part  of  the  will  of  the  testator  on  our  paper-books,  and 
we  must  presume  it  is  the  material  portion  of  it  in  the  case, 
otherwise  the  whole  would  have  been  given  by  the  defendants 
in  error. 

The  will  is  dated  the  21st  of  December,  1854,  with  a  codicil 
dated  the  18th  of  December,  1866,  merely  changing  the  trustees. 
After  designating  the  trustee  and  describing  the  property  in- 
tended to  be  put  in  trust,  the  will  reads :  u  To  hold  upon  trust, 
to  collect  and  receive,  the  rents  and  income  accruing  from  the 
moiety  of  the  said  premises,  and  after  deducting  thereout  all 
taxes  and  charges,  to  pay  the  said  rents  and  income,  or  so  much 
thereof  as  the  trustee  may  think  proper  and  expedient  under  all 
the  circumstances  of  the  case,  to,  and  for  the  support  and  main- 
tenance of  my  son  Charles,  during  the  term  of  his  natural  life, 
with  the  intent  and  purpose  that  the  said  trustee  may  either  pay 
the  said  income,  or  such  portion  thereof  as  he  may  think  proper, 
into  the  hands  of  my  said  son,  or  disburse  the  same  in  such  way 
as  to  the  trustee  may  seem  best  for  his  comfortable  maintenance, 
such  payments  and  disbursements  to  be  at  all  times  at  the  sole  and 
absolute  discretion  of  the  said  trustee."  The  next  item  of  the  will 
(the  seventh)  provides  for  a  contingent  disposition  of  the  corpus 
of  the  property,  also  at  the  discretion  of  the  trustee. 

Because  this  will  contains  no   prohibition   of  liability  of  the 


IN  THE  SUPREME  COURT  OF  PENNSYLVANIA.^  $^361 

income  to  the  debts  of  the  cestui  que  trust,  it  is  claimed,  on  the 
authority  of  the  Girard  Life  Insurance,  Annuity  and  Trust  Co. 
v.  Chambers,  10  Wright,  485,  that  it  is  subject  to  the  attachment 
execution.  I  need  not  stop  to  discuss  that  case  and  distinguish 
it  from  this,  for  in  it  there  was  an  express  direction  to  the  trus- 
tees to  pay  over  absolutely  to  the  cestui  que  trust,  or  to  his  order, 
the  income  of  the  trust  property,  quarterly,  without  the  exercise 
of  the  least  discretion  on  the  subject  by  them.  The  income  was 
therefore  held  to  be  his  own  absolutely,  and  he  could  invoke  the 
aid  of  a  chancellor  to  compel  payment  by  the  trustee  to  him  of 
the  amount,  quarterly,  as  provided  for.  So  might  an  assignee 
or  creditor  of  the  cestui  que  trust  have  done  on  the  same  princi- 
ple. But  here  nothing  is  given  to  the  cestui  que  trust,  excepting 
at  the  discretion  of  the  trustee.  It  was  no  doubt  intended  by  the 
testator  that  a  comfortable  maintenance  should  be  provided  from 
the  trust  estate  for  her  son ;  but  that  was  to  be  both  in  amount 
and  mode,  "at  the  sole  and  absolute  discretion  of  the  trustee." 
This  is  an  express  condition  of  the  trust,  and  until  that  discre- 
tion has  been  exercised,  the  cestui  que  trust  has  nothing,  Hill 
on  Trustees,  494—5.  In  such  case,  chancery  will  not  interfere  to 
control  the  trustee's  discretion,  Id.  495.  To  subject  the  income 
to  execution  at  the  suit  of  a  creditor,  would  end  all  discretion  of 
the  trustee  over  the  income,  and,  in  effect,  utterly  defeat  the  in- 
tent of  the  testator  in  creating  it.  We  can  not  but  regard  this 
form  of  trust  to  be  as  effectual  in  guarding  a  trust  and  its  in- 
come against  the  prodigality  of  its  beneficiary  as  would  be  a 
positive  exclusion  of  creditors  in  the  will  of  the  donor.  Where 
the  amount  results  from  the  discretion  of  the  trustee,  and  that 
discretion  is  personal,  no  sum,  eo  nomine,  exists  to  be  attached. 
It  only  belongs  to  the  cestui  que  trust  when  it  is  paid,  or  in  some 
other  way  made  over,  or  set  apart  to  him.  We  think,  therefore, 
the  attachment  in  this  case  against  the  trustee  was  entirely 
inoperative  to  bind  any  interest  of  the  defendant  in  the  trust 
estate,  and  the  judgment  must  be  affirmed.  Judgment  affirmed. 


362—      p  fc  BARCLAY  v.  LEWIS, 


BARCLAY,  et  at,  v.  LEWIS. 

[Decided  in  the  Supreme  Court  of  Pennsylvania,  January  1 1,  1871,  before 
THOMPSON,  C.  J.,  READ,  AGNEW,  and  WILLIAMS,  J.  J.  SHARSWOOD,  J., 
at  Nisi  Prius.  Reported  in  67  Pennsylvania  State  (17  P.  F.  Smith),  316.] 

A  testator  gave  all  his  estate  to  trustees  to  invest  the  proceeds  at  their"  discre- 
tion ;  out  of  the  income  to  pay  annuities  specified,  to  each  of  his  sons  during 
their  lives;  the  balance  of  the  income  for  the  use  of  his  wife  and  daughter 
for  their  lives,  as  the  wife  might  wish;  any  of  the  income  not  so  used,  to  be 
invested  by  the  trustees,  permitting  the  wife  to  use  part  of  the  income  for 
the  sons;  "the  fund  after  having  been  (so)  administered,  to  be  held  by  the 
trustees,  after  the  death  of  the  wife,  for  the  benefit  of  the  daughter,  the  in- 
come to  be  applied  to  her  use  during  her  life.''  After  the  death  of  the  wife 
and  daughter,  "my  estate  to  be  held  in  trust  for  the  benefit  of  the  children 
of  my  sons  and  daughter,  should  they  have  any,  and  until  said  children  shall 
be  twenty-one  years  of  age,  and  then  be  equally  divided"  among  said  chil- 
dren." Held,  1.  That  the  trust  remained  during  the  lives  of  his  sons  as 
well  as  of  his  wife  and  daughter;  2.  That  the  children  of  the  sons  and  daugh- 
ter took  by  purchase  and  not  by  limitation ;  3.  That  the  children's  title  to 
the  fund  vested  at  their  birth;  4.  That  birth  was  not  a  contingency  too  re- 
mote to  be  unlawful. 

The  daughter  died  unmarried  and  without  issue,  and  the  mother  also  died,  the 
sons  surviving,  neither  of  whom  had  then  any  child;  one  was  afterward  born. 
Held,  that  the  fund  did  not  vest  in  the  sons. 

The  rule  that  a  remainder  requires  a  particular  estate,  does  not  apply  to  trusts. 
Per  HARE,  P.  J. 

In  order  to  bind  a  trust  by  a  decree,  notwithstanding  there  be  many  limitations, 
it  is  sufficient  to  bring  the  trustee  before  the  court,  and  him  in  whom  the  first 
remainder  is  vested;  and  all  that  may  come  after,  although  not  in  esse,  will 
be  bound,  Id. 

ERROR  TO  THE  DISTRICT  COURT  OF  PHILADELPHIA. 

IN  the  court  below  this  was  an  amicable  action  of  debt,  and 
case  stated,  in  which  Herman  B.  Barclay  and  James  C.  Barclay 
were  plaintiffs  and  S.  Weir  Lewis  was  defendant.  The  facts 
agreed  in  the  case  stated  are  as  follows,  viz.: 

"John  L.  Barclay  died  in  the  year  I860,  seized  in  his  de- 
mesne as  of  fee  of  and  in  an  undivided  moiety  of  a  messuage 
and  lot  of  ground,  situate  on  the  east  side  of  Third  Street,  etc., 
containing,  etc.,  having  first  made  and  published  his  will,  bear- 
ing date  the  12th  day  of  April,  A.  D.  I860,  duly  proved  and 
registered  in  Fayette  county,  Kentucky.  The  said  decedent 
left  him  surviving  his  widow,  Lucy  M.  Barclay,  a  daughter, 


IN  THE  SUPREME  COURT  OF  PENNSYLVANIA.  363 

Fanny  B.  Barclay,  and  two  sons,  Herman  B.  Barclay  and  James 
C.  Barclay,  the  plaintiffs  in  this  suit.  In  the  year  1860  the  said 
widow  and  daughter  both  died.  The  daughter  died  unmarried 
and  intestate,  and  the  plaintiffs  are  the  heirs  at  law  as  well  of 
their  said  father  as  of  their  said  mother  and  sister.  At  the  time 
of  the  decease  of  the  survivor  of  them,  the  said  mother  and  sis- 
ter of  plaintiffs,  there  was  no  child  born  of  said  sons  or  daughter 
of  testator.  Since  that  time  the  plaintiff,  H.  B.  Barclay,  has 
married  and  had  a  child  born,  who  is  now  living. 

G.  T.  Bispham  and  Cadwallader  Biddle,  for  plaintiffs  in  error. 
C.  S.  Pancoast,  for  defendant  in  error. 

AGNEW,  J.,  delivered  the  opinion  of  the  Court,  February  9th, 
1871  :  The  primary  rule  in  the  interpretation  of  wills  is  to  deter- 
mine the  true  intention  of  the  testator,  and,  if  lawful,  to  give  it 
effect.  If  this  great  canon  of  interpretation  be  observed,  there 
will  be  little  difficulty  in  applying  to  a  will  the  law  which  gov- 
erns the  creation  and  transmission  of  estates.  We  shall  then  be 
less  embarrassed  by  the  artificial  and  difficult  rule  relating  to 
contingent  remainders,  executory  devises,  and  trusts.  It  can 
not  be  doubted  that  John  L.  Barclay  created  a  trust  to  be  man- 
aged by  the  trustees  named  in  his  will,  during  the  lives  of  his  wife, 
two  sons,  and  daughter.  He  gave  his  trustees,  for  this  purpose, 
large  powers  to  sell,  lend  on  mortgage,  or  otherwise  to  invest, 
and  pay  over  the  income  of  his  estate  in  certain  proportions  to 
his  wife,  daughter,  and  sons.  The  direction  to  the  trustees  to 
pay  annuities  of  $500  and  $600  to  his  sons,  is  expressly  for  and 
during  life.  He  says  that  out  of  the  income  of  the  before- 
directed  investment,  his  trustees  shall  pay  to  each,  annually,  the 
said  sums.  The  "  before-directed  investment  "  is,  u  shall  invest 
all  the  proceeds  of  my  estate,  not  hereinbefore  provided  for  the 
payment  of  my  debts,"  etc.  It  is  clear,  therefore,  that  the  tes- 
tator intended  that  the  trust,  which  was  by  its  nature  and  terms 
an  active  one,  should  remain  during  the  lives  of  his  sons  as  well 
as  of  his  wife  and  daughter,  for  as  to  all  he  provided  only  for 
the  payment  of  income,  while  all  of  his  estate  was  to  be  invested. 
It  was  in  terms  u  the  balance  of  the  income  of  my  (his)  estate 
after  the  annual  payment "  of  the  $500  and  $600  to  his  sons, 
which  he  directed  to  be  paid  to  his  wife  and  daughter :  And  it 


» 364  BARCLAY  v.  LEWIS, 


was  the  income  only  which  his  daughter  was  to  receive  after  the 
death  of  his  wife,  for  and  during  her  natural  life.  As  he  could 
not  know  which  of  these  objects  of  the  payment  of  income  would 
die  first,  while  all  of  his  estate  was  to  be  invested,  it  is  evident  he 
intended  an  active  management  of  the  trust  to  invest,  preserve, 
and  pay  over  the  income,  to  exist  so  long  as  any  of  the  objects 
should  survive.  Then  we  come  to  the  13th  item,'  providing  for 
the  contingency  of  the  deaths  of  his  wife  and  daughter:  "  13th. 
I  direct  that  after  the  death  of  my  wife  and  my  daughter  Fanny, 
my  estate  shall  be  held  in  trust  for  the  benefit  of  the  children  of 
my  sons  and  daughter,  should  they  have  any,  and  until  said 
children  shall  be  twenty-one  years  of  age,  and  then  equally 
divided  among  said  children."  The  children  here  take  not  by 
limitation,  or  per  stirpes,  but  as  purchasers  in  their  own  right, 
their  title  vesting  at  birth,  but  deferred  in  the  time  of  enjoy- 
ment until  their  arrival  at  full  age.  It  is  obvious  that  the  trust 
and  the  investment  as  income  must  necessarily  survive  the  death 
of  the  wife  and  daughter  (leaving  the  sons  surviving),  in  order 
to  pay  the  annual  income  of  $500  and  $600  to  the  sons,  and  pre- 
serve the  remainder  for  the  children  born  or  to  be  born.  The 
legacy  to  the  children  was  not  to  accrue  at  one  fixed  and  inde- 
pendent period,  or  upon  any  contingency  or  condition  other  than 
birth,  which  would  prevent  it  from  vesting  at  birth,  or  opening 
to  receive  after-born  children.  Birth  was  a  contingency  neither 
impossible  nor  too  remote,  and  was  therefore  not  unlawful. 
There  is  no  reason  then  why  the  intent  of  the  testator  to  pro- 
vide absolutely  for  the  children  of  his  sons  and  daughter  in 
equal  proportions  when  arriving  into  life,  should  be  set  aside  in 
favor  of  the  sons  to  whom  he  clearly  intended  to  give  the  an- 
nuities of  $500  and  $600  during  their  lives,  and  nothing  more. 
-It  is  impossible  to  deny  the  intention  of  the  testator  to  create  a 
continuing  active  trust,  to  remain  during  the  lives  of  his  sons, 
and  preserve  the  estate  to  their  children  in  their  own  right. 
There  being  nothing  too  remote,  contingent,  or  unlawful  in  this 
provision,  it  is,  therefore,  not  to  be  set  aside  by  any  artificial  or 
technical  rules.  The  law  will  support  it,  call  it  by  one  name  or 
another.  There  is  abundant  authority  for  this  to  be  found  in 
the  opinion  of  the  learned  judge,  and  in  the  citations  of  the 
defendant  in  error.  Judgment  is  therefore  affirmed. 


SEICHRIST'S  APPEAL.  '      365- 


SEICHRIST'S   APPEAL. 

[Decided  in  the  Supreme  Court  of  Pennsylvania,  October  21,  1870,  before 
THOMPSON,  C.  J.,  READ,  AGNEW,  SHARSWOOD,  and  WILLIAMS,  J.  J.  Re- 
ported in  66  Pennsylvania  State  (16  P.  F.  Smith),  237.] 

Z  bought  a  lot  of  M  by  articles,  look  possession,  and  made  improvements.  Being 
unable  to  make  the  payments,  he  sold  part  to  S  by  parol,  the  division  line 
being  fixed  by  them.  M,  with  the  consent  of  Z,  made  the  deed  for  the  whole 
to  S,  he  agreeing  with  Z  to  hold  the  other  part  in  trust  for  Z,  and  convey  to 
him  on  his  paying  his  share  of  the  purchase-money.  Z  continued  in  pos- 
session of  his  part  according  to  a  line  accurately  located,  and  made  improve- 
ments. S  refused  to  convey.  Held,  that  he  held  in  trust  for  Z,  and  could  be 
compelled  to  convey;  and  also,  that  the  case  was  not  within  the  fourth  section 
of  the  act  of  April  22,  1856. 

Held,  also,  that  while  the  act  of  1856  destroys  all  parol  trusts  by  contract,  this 
trust 'arose  by  implication  and  construction  of  law,  and  is  within  the  proviso 
of  the  fourth  section. 

A  trust  arising  from  the  fraud  of  the  holder  of  the  title  is  one  by  operation  of  law; 
and  where  one  procures  a  title  which  he  could  not  have  obtained  except  by  a 
confidence  reposed  in  him,  and  abuses  the  confidence,  he  becomes  a  trustee 
ex  maleficio. 

APPEAL  from  the  Court  of  Common  Pleas  of  Erie  County,  in 
equity.  The  decision  in  the  Common  Pleas  was  for  the  plaintiff, 
Zirkenbach,  from  which  Seichrist  appealed  to  the  Supreme 
Court. 

C.  S.  Curtis,  for  appellant.     J.  H.  Walker,  for  appellee. 

The  opinion  of  the  Court  was  delivered  January  3d,  1871, 
by  AGNEW,  J. :  The  facts  of  this  case,  we  think,  are  clearly 
proved.  Zirkenbach  had  a  contract  with  Elihu  Marvin  for  the 
purchase  of  three  acres  of  land,  on  which  he  had  made  a  small 
payment  in  work,  and  was  in  actual  possession  under  his  contract, 
having  built  a  house  and  made  some  minor  improvements.  Be- 
ing unable  to  pay  the  purchase-money,  he  agreed  with  Seichrist 
to  sell  him  the  northern  part  by  a  line  to  be  run  in  continuation 
of  the  line  of  an  adjoining  lot  owned  by  Seichrist,  to  the  old 
French  road,  provided  Seichrist  would  pay  off  the  balance  of  the 
purchase-money  to  Marvin.  Marvin,  being  applied  to,  declined 
to  make  two  deeds,  but  suggested  that  Seichrist,  on  paying  the 
balance  of  the  purchase-money  to  him,  could  take  the  deed  for 


366  SEICHRIST'S   APPEAL, 

the  three  acres,  and  afterward  convey  to  Zirkenbach  his  part 
when  he  should  pay  for  it.  This  was  accordingly  done,  and  in 
a  few  days  a  fence  was  put  up  by  Seichrist  on  the  line  between 
him  and  Zirkenbach,  Seichrist,  at  the  time,  stating  it  to  be  the 
division  fence  between  them.  Afterward,  Seichrist  procured  the 
line  to  be  traced  by  two  surveyors  for  the  purpose  of  making  an 
accurate  survey  of  this  parcel,  in  order  to  convey  his  part  to 
Zirkenbach.  For  a  while  Seichrist  did  not  deny  his  obligation 
to  convey  to  Zirkenbach,  but  finally,  on  the  latter  tendering 
him  his  money,  or  as  much  as  Zirkenbach  thought  was  coining, 
and  demanding  a  deed,  Seichrist  denied  the  bargain  and  refused 
to  convey.  In  the  mean  time,  Zirkenbach  had  remained  in  pos- 
session, and  had  built  a  small  stable  or  barn.  The  court  below 
held  that  a  trust  arose  out  of  these  facts,  and  decreed  in  favor 
of  Zirkenbach. 

The  argument  in  this  Court  is  founded  upon  the  4th  section 
of  the  Statute  of  Frauds  of  the  22d  of  April,  1856,  which  re- 
quires all  declarations  or  creations  of  trusts  of  any  lands,  tene- 
ments, or  hereditaments,  to  be  manifested  by  writing,  signed  by 
the  party  holding  the  title  thereof.  If  nothing  more  existed  in 
the  case  than  a  mere  bargain  between  the  parties  that  Seichrist 
should  take  a  title  for  the  land  from  Marvin,  and  afterward  con- 
vey to  Zirkenbach  on  payment  of  the  proportionate  share  of  the 
purchase-money,  the  argument  would  be  irresistible.  Undoubt- 
edly the  act  of  1856  cuts  up  by  the  root  all  parol  trusts  by  bar- 
gain or  contract.  It  is  intended  to  prevent  frauds  in  relation  to 
the  title  of  real  estate,  by  requiring  the  evidence  of  it  to  be 
witnessed  by  a  writing.  But  we  are  of  opinion  that  this  case 
falls  within  the  proviso  to  the  4th  section  of  the  act  of  1856, 
that  where  any  conveyance  shall  be  made  of  any  lands  or  ten- 
ements by  which  a  trust  or  confidence  shall  arise  by  implication 
or  construction  of  law,  such  trust  or  confidence  shall  be  of  like 
force  and  effect  as  if  the  act  had  not  been  passed.  Among  the 
trusts  thus  resulting  from  the  operation  of  law  are  those  arising 
from  the  fraud  of  the  party  who  has  the  title.  Although  no  one 
can  be  compelled  to  part  with  his  own  title  by  force  of  a  mere 
verbal  bargain,  yet  when  he  procures  a  title  from  another  which 
he  could  not  have  obtained  except  by  a  confidence  reposed  in 
him,  the  case  is  different.  Here,  if  he  abuses  the  confidence  so 


IN  THE  SUPREME  COURT  OF  PENNSYLVANIA.  367 

reposed,  he  is  converted  into  a  trustee  ex  maleficio.  The  statute 
which  was  intended  to  prevent  frauds  turns  against  him  as  the 
perpetrator  of  a  fraud.  It  is  not,  therefore,  the  fact  that  the 
bargain  by  which  he  was  enabled  to  obtain  the  title  is  verbal, 
which  governs  the  case,  but  the  fact  that  he  procured  the  title 
to  be  made  to  him  in  confidence,  the  breach  of  which  is  fraudr- 
lent  and  in  bad  faith.  Clearly  such  is  the  case  before  us.  Zir- 
kenbach  was  the  equitable  owner,  and  controlled  the  title  to  the 
whole  three  acres.  Marvin  could  not  sell  it  to  Seichrist,  nor 
could  he  reclaim  the  property  without  a  legal  proceeding  to 
dispossess  Zirkenbach,  and  rescind  the  contract.  When  Sei- 
christ, therefore,  took  the  title  from  Marvin,  he  did  so  only  by 
the  consent  of  Zirkenbach,  who  gave  it  in  confidence,  relying 
on  the  faith  of  Seichrist  that  he  would  hold  a  certain  part  of  the 
land  in  trust  for  him.  Thus  Seichrist  took  in  confidence  that 
which  he  could  not  retain  without  bad  faith  and  fraud.  Clearly, 
had  Zirkenbach  known,  or  had  Seichrist  indicated,  that  he 
would  hold  the  title  to  himself,  the  former  never  would  have 
permitted  or  given  the  latter  an  opportunity  of  obtaining  it.  If 
Seichrist  intended  to  retain  the  land,  and  did  not  say  so  to  Zir- 
kenbach, it  was  as  clearly  a  fraud,  and  he  is  converted  into  a 
trustee  ex  maleficio. 

Without  a  further  discussion  of  the  case,  the  conclusion  we 
have  come  to  is  fully  supported  by  Beagle  v.  Wente,  5  P.  F. 
Smith,  and  the  authorities  therein  cited  on  the  374th  page.  To 
which  may  be  added  Hoge  v.  Hoge,  1  Watts,  163,  and  the  more 
recent  case  of  Lingenfelter  v.  Ricliey,  8  P.  F.  Smith,  485. 

The  case  being  one  of  trust  ex  maleficio,  answers  the  argu- 
ment as  to  uncertainty  alleged  in  relation  to,  the  price  of  the  one 
acre  and  thirty-nine  perches  retained  by  Zirkenbach.  Had  the 
case  depended  on  a  parol  sale,  and  the  element  in  it  of  price 
had  been  left  uncertain,  the  argument  would  have  had  great 
force.  But  where  the  defendant  has  obtained  a  title  in  confi- 
dence, and  retains  it  by  fraud,  the  argument  has  not  the  same 
weight.  We  think,  however,  that  on  the  evidence  there  is  not 
much  difficulty  in  arriving  at  the  true  sum  to  be  paid  by  Zir- 
kenbach. It  was  evidently  at  the  rate  of  $216  per  acre,  which 
is  borne  out  by  the  testimony  of  Charles  Seichrist,  who  testifies 
that  his  father  and  Zirkenbach,  in  August,  1867,  made  the  sum 


SEICHRIST'S   APPEAL. 


then  due  on  Zirkenbach's  part  (one  acre  and  thirty -nine  perches), 
$315.  This  would  be  at  the  rate  of  $216  per  acre,  and, interest 
added  from  May  5th,  1864.  To  this  we  think  the  court  below 
ought  to  have  added  the  $30  agreed  to  be  paid  by  Zirkenbach 
to  Seichrist  for  his  trouble,  and  the  expense  of  the  surveyors ; 
and  thus  far  the  decree  should  be  modified.  The  decree  of  the 
Court  of  Common  Pleas  is  therefore  affirmed,  adding  to  the  sum 
decreed  to  be  paid  by  the  plaintiff  the  further  sum  of  $30,  with 
interest  from  the  time  of  the  decree ;  and  the  appellant  is  ordered 
to  pay  all  costs,  including  those  of  this  appeal  (a). 

(a)  In  Warner  v.  Ulakeman,  41  New  York  (4  Keyes),  487,  it  was  held  by  the 
New  York  Court  of  Appeals,  Judge  WOODRUFF  delivering  the  opinion  of  the  court, 
that  "it  is  the  just  and  proper  pride  of  our  matured  system  of  equity  jurispru- 
dence, that  fraud  vitiates  every  transaction;  and  however  men  may  surround  it 
with  forms,  solemn  instruments,  proceedings  conforming  to  all  the  details  re- 
quired in  the  laws,  or  even  by  the  formal  judgment  of  the  courts,  a  court  of 
equity  will  disregard  them  all,  if  necessary,  that  justice  and  equity  may  pre- 
vail." That  a  mortgage,  in  fact  paid  and  satisfied,  though  without  satisfaction 
formally  acknowledged,  is  merely  waste  paper,  and  the  power  of  sale  contained 
therein  is  at  an  end,  in  so  far  that  it  can  not  thereafter,  by  transfer  to  a  third 
party  having  knowledge  of  the  facts,  be  revived  and  made  effectual  to  destroy 
or  to  impair  the  subsisting  lien  of  a  judgment-creditor  upon  the  lands  conveyed  by 
such  mortgage;  and  as  between  a  judgment-creditor  and  the  fraudulent  grantee 
of  a  conveyance  interposed  to  cut  off  the  lien  of  a  judgment  upon  the  lands  con- 
veyed, the  lien  of  the  creditor  can  not  be  extinguished  nor  impaired.  The  ap- 
propriate form  of  remedy  for  the  judgment-creditor,  where  under  a  fraudulent 
foreclosure,  sale,  and  conveyance,  a  legal  title  has  been  interposed,  paramount 
under  the  forms  of  law,  to  his  lien,  is  by  an  action  to  set  aside  such  fraudulent 
conveyance.  But  where  the  intervening  rights  of  subsequent  bonafide  purchasers 
renders  such  a  decree  inappropriate,  as  being  in  disregard  of  their  title,  inno- 
cently acquired,  derived  through  the  forms  of  law,  and  having  the  sanction  of 
the  courts  in  its  support,  it  by  no  means  follows  that  the  .plaintiff  is  remediless, 
and  that  the  fraudulent  conveyancer  is  thus  to  be  left  to  profit  by  his  wrong. 
And  in  such  case,  relief  may  be  properly  afforded  through  the  appointment  of  a 
receiver,  to  whom  the  fraudulent  conveyancer  shall  account  for  all  moneys  re- 
ceived from  sales  to  bonafide  purchasers;  to  whom  he  shall  assign  any  mortgages 
taken  for  part  of  the  purchase-money  of  such  sales;  and  to  whom  he  shall  con- 
vey any  of  such  lands  still  unconvcyed,  subject  to  any  contracts  to  convey,  or 
otherwise;  and  to  such  receiver  the  bona  fide  mortgagors  shall  also  account  for 
the  balance  remaining  unpaid  on  such  mortgages,  and  parties  holding  the  de- 
fendant's contracts  to  convey,  shall  likewise  account  to  such  receiver  for  the 
balance  due  on  Buch  contracts,  and  will  on  the  payment  thereof,  be  entitled  to 
receive  deeds  of  conveyance.  In  effect,  the  FRAUDULENT  CONVEYANCER  is  THUS 
MADE  A  TRUSTEE  OF  THE  JUDGMENT-CREDITOR,  and  is  required  to  account  to 
him,  through  bis  agent,  the  receiver,  in  that  capacity." 


KLOPP  v.  MOORE.  369  •^ 


MATTHIAS  KLOPP  v.  GEORGE  A.  MOORE  et  al. 

[Decided  at  the  January  term,  1870,  in  the  Supreme  Court  of  Kansas, 
Justice  JACOB  SAFFORD  delivering  the  opinion.  Reported  in  6  Webb's 
Kansas,  27.] 

Title  to  property  of  religious  corporations,  by  the  Constitution  of  Kansas,  vests 
in  the  trustees;  and  trustees  of  such  corporations  can  not  bind  the  corpora- 
tion by  their  covenant,  unless  duly  authorized. 

When  the  trustees  of  a  church,  organized  under  the  laws  of  this  State,  in  making 
a  deed  of  real  estate,  covenant  under  their  hands  and  seals  to  warrant  and 
defend  the  quiet  and  peaceable  possession  of  the  same,  without  showing  in 
any  manner  that  authority  had  been  given  them  by  the  corporation  for  the 
making  of  such  covenant,  and  without  expressly  excluding  personal  liability: 
Held,  that  they  are  personally  liable  on  such  covenant. 

ACTION  on  covenant  of  title,  in  error  from  Leaven  worth  Dis- 
trict Court.  In  September,  1865,  Abel  H.  Peck,  George  A. 
Moore,  Eugene  B.  Allen,  J.  M.  Raymond,  and  Josiah  C.  Spring, 
Trustees  of  the  Baptist  Church  and  Society  of  Leavenworth,  sold 
and  conveyed  to  the  plaintiff  certain  real  estate  by  deed,  with 
covenant  for  quiet  and  peaceable  possession.  [The  deed  was  in 
the  form  of  an  indenture,  and  recited  that  the  same  was  made  be- 
itween  "  A.  H.  Peck,  Gr.  A.  Moore,  E.  B.  Allen,  J.  M.  Raymond, 
and  Josiah  C.  Spring,  Trustees,  and  as  trustees  of  the  Baptist 
Church  and  Society,"  etc.  The  covenant  was  in  these  words  : 
"And  the  said  parties  of  the  first  part,  as  such  trustees,  and 
their  successors,"  would  warrant,  etc.;  and  the  testing  clause 
was  in  the  usual  form  of  a  deed,  without  adding  "  trustees" 
after  the  signatures  and  seals  of  the  signers.]  Said  deed,  so 
signed  and  sealed  by  each  of  said  parties,  was  acknowledged 
by  them  severally,  and  was  duly  stamped  and  recorded. 

The  plaintiff  was  evicted  under  a  paramount  title,  and 
brought  his  action  on  the  covenant.  Peck,  Moore,  and  Allen 
were  served ;  the  others  were  not.  Moore  and  Allen  answered, 
first,  general  denial ;  and  second,  the  defendants  were  trustees, 
acting  for  the  corporation.  Peck  was  in  default.  The  case  was 
tried  by  the  court.  Special  findings  were  made.  As  conclusion 
of  law,  the  court  found  that  the  defendants  were  not  liable  on  the 
covenant.  The  plaintiff  moved  for  a  new  trial  on  the  grounds 

24 


"0  KLOPP  v.  MOORE, 


of  error  of  law  occurring  at  the  trial,  and  that  the  findings 
were  contrary  to  law,  and  not  sustained  by  sufficient  evi- 
dence, which  motion  was  overruled,  and  judgment  entered  for 
the  defendants.  This  judgment  the  plaintiff  seeks  to  have 
reversed. 

James  M'Cahon,  for  plaintiff.  Hitrd  and  StiUings,  for  de- 
fendants. 

SAFFORD,  J.,  delivered  the  opinion  of  the  Court :  The  de- 
fendants here  and  below  were,  with  others,  on  September  llth, 
1865,  the  trustees  of  the  Baptist  Church  and  Society  of  Leaven- 
worth  City,  in  this  State.  On  the  day  named,  they  executed 
and  delivered  to  the  plaintiff  a  deed  of  and  to  certain  real  estate 
situate  in  the  county  of  Leavenworth,  which  said. deed  contained 
the  usual  covenants  of  warranty  for  quiet  and  ^peaceable  pos- 
session of  the  said  property,  and  was  executed  in  the  individual 
names,  and  under  the  private  seals  of  the  parties  grantors.  Af- 
terward the  said  real  estate  was  recovered  from  the  plaintiff, 
under  a  paramount  title,  and  he  brought  his  action  on  the  cov- 
enants in  his  deed  against  all  of  said  grantors,  and  in  their  indi- 
vidual capacities.  These  defendants  answered,  in  substance, 
that  they  were  not  liable  individually  on  said  covenants,  but  that 
they  executed  the  same  for  and  in  behalf  of  the  Baptist  Church 
and  Society  as  aforesaid,  and  as  the  trustees  of  such  organiza- 
tion. A  trial  was  had  which  resulted  in  favor  of  the  defendants 
by  reason  of  the  finding  by  the  court,  as  a  conclusion  of  law, 
that  they  were  not  liable  as  individuals  on  the  said  covenant  of 
warranty. 

I.  As  to  the  question  where  the  title  to  the  property  of  re- 
ligious corporations  vests,  there  is  no  room  for  argument.     This 
is  settled  by  the  Constitution,  article    12,  section   3.      If,  then, 
such    property   is   sold,   the   title    thereto  must  come   from   and 
through  the  trustees,  for  the  time   being,   of  such  corporation, 
and  their  deed  is  sufficient  to  convey  such  title.     This  is  all  con- 
ceded in  the  argument  of  counsel,  and  the  point  may  be  passed 
without  further  mention  ;  though  see  chapter  xlv,  section  1,  Com- 
piled Laws,  18G2,  as  to  preliminary  steps. 

II.  But  it  is  contended  that  such  trustees  could  not  bind  the 
corporation  by  a  covenant  of  warranty — as  it  is  claimed  in  their 


IN  THE  SUPREME  COURT  OF  KANSAS.        371 

behalf,  in  this  instance,  was  done — without  a  special  authority  for 
that  purpose  having  first  been  given  them  by  the  corporation 
represented  by  them.  And  it  is  further  claimed  that -no  such 
authority  is  shown  by  the  record.  An  examination  shows  the 
last  statement  or  claim  to  be  correct.  It  is  true,  that  the  court 
trying  the  cause  found  that  such  authority  had  been  given  ;  but 
inasmuch  as  all  of  the  evidence  which  was  introduced  on  the 
trial  is  preserved  and  brought  before  us,  we  may  go  behind  such, 
finding,  and  examine  such  evidence  with  a  view  of  determining 
for  ourselves  Avhether  or  no  that,  or  indeed  any  other,  finding  is 
sustained  by  evidence.  This  we  have  done,  and  find  no  testi- 
mony ivliatevcr  going  to  establish  the  finding  in  question.  The 
court  therefore  erred  in  making  it. 

III.  The  question  now  recurs,  How,  under  the  circumstances, 
did  the  making  of  the  warranty  affect  the  corporation  which  was 
sought  to  be  represented  by  these  parties-  defendant  ?  We  think 
that  the  reply  to  this  inquiry  must  be,  that  such  corporation  was 
in  nowise  affected  or  bound  thereby.  The  covenant  was  not  in 
the  name  of,  nor  was  it  executed  by,  the  corporation,  but  was  be- 
tween the  defendants,  who  described  themselves  in  the  body  of 
the  deed  as  trustees,  etc.,  but  signed  it  in  their  individual  capacity 
only,  and  the  plaintiff.  The  stipulation,  also,  was  in  behalf  of 
themselves  and  their  successors,  instead  of  on  behalf  of  said 
corporation.  In  such  a  case  it  has  often  been  held,  and  seems 
to  be  well  settled,  that  the  covenant  and  stipulation  are  not  that 
of  any  supposed  principal,  but  are  those  of  the  parties  so  exe- 
cuting them  ;  and,  a  fortiori,  when  there  is  an  utter  failure  to  show 
any  authority,  either  in  the  instrument  itself  or  otherwise,  for  the 
making  of  such  covenant  and  stipulation  for  and  on  behalf  of 
such  supposed  principal,  or  to  exclude  personal  responsibility  in 
express  terms,  14  Conn.  244.  "  If  a  conveyance  of  real  property, 
purporting  to  be  the  conveyance  of  a  corporation,  made  by  one 
authorized  to  make  it  for  them,  be  in  fact  executed  by  the  attor- 
ney or  agent  in  his  own  name,  as  his  own  deed,  it  will  not  be 
the  deed  of  the  corporation,  although  it  was  intended  to  be  so. 
The  conveyance  must  purport  to  be  made  and  executed  by  the 
corporation,  acting  by  its  duly  authorized  agent,"  42  Mo.  78. 
As  bearing  upon  this  point,  see  also  4  Mass.  594;  12  Id.  174; 
13  Johns.  310 ;  and  other  authorities  referred  to  in  the  decisions 
named. 


372  KLOPP  v.  MOORE, 


But  it  is  said  that  these  defendants  intended  to  bind  the  cor- 
poration as  to  every  agreement  in  the  deed,  and  that  such  effect 
should  be  given  to  it,  and  every  part  of  it,  as  to  carry  out  such 
intention.  It  is  perhaps  the  best  and,  under  the  circumstances 
at  least,  a  sufficient  answer  to  this  proposition  to  say,  that  they 
did  not  do  what  it  is  thus  claimed  they  intended,  if  effect  is  to 
be  given  to  the  language  used  according  to  its  naturally  received 
and  legal  import.  (See  cases  above  cited.)  And  there  seems  to 
be  no  very  good  reason  why  the  natural  and  legal  construction 
should  not  be  adopted.  But  it  is  further  said,  that  if  the  parties 
only  bound  themselves  by  their  covenant  of  warranty,  then  that 
part  of  their  deed  which  refers  to  their  successors  must  be  held 
void.  This  may  be  true ;  but  this  is  only  a  very  small  part  of 
the  deed,  and  certainly  it  is  better  and  more  in  accord  with  just 
and  well-established  rules  of  construction,  to  regatd  such  refer- 
ence as  ineffective  for  any  purpose,  or  as  surplusage,  than  to 
give  it  such  force  as  will  do  violence  to  all  the  remainder  of  such 
deed  by  compelling  a  meaning  to  be  given  thereto  which  is  not 
expressed,  and  would  not  otherwise  be  suggested.  But  see  as 
to  this  part  of  the  case,  14  Conn.  245,  and  other  cases  cited  by 
plaintiff  in  error,  which  are  full,  and  afford  a  satisfactory  dispo- 
sition of  the  questions  here  involved.  Upon  the  conclusions  thus 
reached  in  this  case,  it  seems  to  follow  too  plainly,  and  especially 
from  the  authorities,  to  require  argument  to  show  it,  that  these 
parties  must  be  held  to  have  bound  themselves  by  their  said 
covenant  of  warranty  in  the  deed  to  plaintiff  in  error,  and  as  the 
record  now  stands,  they  must  be  held  to  the  liability  thereby 
assumed.  Upon  this  point  the  following  cases  are  referred  to: 
8  Mass.  162;  4  Id.  594 ;  15  Pick.  433 ;  42  Mo.  74 ;  5  Mass.  299 ; 
6  Id.  58;  10  Ohio  St.  444. 

The  judgment  of  the  District  Court  is  reversed,  and  the 
cause  remanded  with  instructions  to  grant  a  new  trial.  All  the 
justices  concurring. 


SHARKLEY  ».  TAYLOR. 


ELIZA  SHARKLEY,  et  als,  v.  A.  M.  TAYLOR,  et  al. 

[Decided  in  the  Circuit  Court  for  the  Southern  District  of  Ohio,  at  the 
October  term,  1857,  by  Judge  HUMPHREY  H.  -LEAVITT.  Reported  in  \ 
Bond,  142.] 

The  law  is  well  settled,  that  a  person  occupying  the  position  of  a  fiduciary  can 
not  be  a  purchaser  of  the  trust  property,  even  in  the  absence  of  any  ground 
for  the  presumption  of  actual  fraud. 

Where  three  persons  were  administrators  of  an  insolvent  estate,  and  had  ob- 
tained an  order  from  the  Probate  Court  for  sale  of  defendant's  land  to  pay 
debts,  and  at  the  sale  a  note  was  taken  for  a  part  of  the  purchase-money, 
payable  to  the  administrators,  upon  which  suit  was  brought,  judgment  ob- 
tained, and  the  property  offered  for  sale  by  the  sheriff  on  execution,  and  at 
the  sale  one  of  the  administrators  became  the  purchaser  at  two-thirds  of  the 
appraisement:  Held,  that  such  administrator  did  not  occupy  a  fiduciary 
relation  to  the  land,  and  that  the  sheriffs  deed  vested  a  good  title  to  him. 

If  the  purchaser  could  be  viewed  on  any  ground  as  a  trustee  under  the  facts  of 
this  case,  the  creditors  of  the  insolvent  decedent,  and  not  the  heirs,  would 
be  the  proper  persons  to  impeach  the  sale. 

Mills  &  Hoadley,  for  complainants.  Sail  &  Skinner,  and 
Collins  &  Herron,  for  defendants. 

JUDGE  LEAVITT  delivered  the  opinion  of  the  Court:  The 
questions  submitted  in  this  case  arise  on  a  demurrer  to  a  bill  in 
equity.  The  facts  set  forth  in  the  bill  may  be  briefly  stated  as 
follows:  In  1816,  James  K.  Bailey  died  without  issue,  intestate 
and  insolvent,  seized  of  an  interest  of  one  undivided  half  in 
certain  real  estate  in  Cincinnati,  which  he  held  in  common  with 
one  John  B.  Enness,  leaving  a  widow,  Eliza  Bailey,  since  de- 
ceased, and  a  sister,  Susan  Sharkley,  wife  of  Robert  Sharkley, 
a  citizen  of  Adams  County,  in  the  state  of  Pennsylvania,  his 
only  heir  at  law.  Susan  Sharkley  died  in  said  county  in  1825, 
leaving  several  children,  all  of  tender  age,  who,  including  the 
heirs  of  one  since  deceased,  are  the  complainants  in  this  case. 

Eliza  Bailey,  widow  of  James  K.  Bailey,  and  William  Ban* 
and  James  Keys,  were  duly  appointed  administratrix  and  admin- 
istrators of  the  estate  of  said  Bailey,  and  filed  their  petition  in 
the  Probate  Court  for  the  sale  of  the  interest  of  said  Bailey  in 
the  real  estate  described  in  the  bill,  to  pay  the  debts  owing  by 
his  estate,  in  March,  1817  ;  an  order  of  sale  was  made  by  said 
court,  and  in  pursuance  thereof,  in  September,  1818,  the  prop- 


374  SHARKLEY  v.  TAYLOR; 

erty  was  sold  to  Samuel  Still,  for  the  sum  of  $2,000,  for  which 
he  executed  his  notes  in  equal  amounts,  payable  in  one,  two, 
and  three  years,  secured  by  mortgage.  The  sale  was  approved 
of,  and  confirmed  by  the  Court  of  Probate,  and  a  deed  was  made 
by  the  administrators.  .  The  sale,  it  appears,  was  made  free  from 
any  claim  of  dower  by  the  widow,  but  with  the  understanding 
that  in  lieu  of  dower  she  should  receive  the  interest  on  one-third 
of  the  purchase-money  during  her  life,  and  that  at  her  death, 
the  principal  should  be  returned  to  the  estate  and  applied  to  the 
payment  of  the  debts. 

The  purchaser,  Still,  having  failed  to  pay  the  notes  given 
for  the  purchase-money,  was  sued  on  one  or  more  of  them,  and, 
in  1824,  the  administrators  of  Bailey  obtained  a  judgment  against 
him  in  the  Court  of  Common  Pleas  of  Hamilton  County.  Exe- 
cution was  issued  on  this  judgment,  which  was  levied  on  the 
property  described  in  the  bill,  of  which  the  said  Still  was  then 
the  sole  owner,  having  previously  purchased  the  undivided  in- 
terest of  said  Enness  therein.  In  1826  the  property  was  offered 
at  public  sale  by  the  sheriff  of  Hamilton  County,  upon  the  exe- 
cution issued  as  before  stated,  and  was  sold  to  said  William  Barr 
for  $1,868,  that  being  two-thirds  the  appraised  value.  This  sale 
was  confirmed  by  the  court,  and  an  order  made  requiring  the 
sheriff  to  execute  a  deed  to  the  purchaser.  The  sheriff,  by  his 
deed,  dated  August  31,  1826,  conveyed  the  premises  to  William 
Barr,  under  whom  the  defendants  in  this  case  severally  claim 
title.  It  is  alleged  that  these  defendants  purchased  with  notice 
of  the  facts  charged  in  the  bill ;  and  the  complainants  pray  that 
the  purchase  made  by  Barr,  as  above  mentioned,  may  be  held 
to  be  a  purchase  in  trust  for  them,  and  that  on  being  reimbursed 
to  the  amount  paid  by  them,  with  interest,  the  present  claimants 
may  be  decreed  to  convey  the  proportions  of  the  property  held 
by  them  respectively  to  the  complainants,  and  also  to  account  to 
them  for  the  rents  and  profits.  It  is  also  averred  in  the  bill, 
that  the  complainants  are  now,  and  have  been  since  their  birth, 
residents  of  Pennsylvania,  and  until  recently  were  minors,  and 
had  no  knowledge  of  the  facts  set  forth  in  their  bill  till  about  the 
year  1853. 

Upon  the  facts  thus  alleged  in  the  bill,  the  main  inquiry 
presented  by  the  demurrer  relates  to  the  character  and  legal 


CIRCUIT  COURT  SOUTHERN  DISTRICT  OF  OHIO.        375 

effect  of  the  purchase  of  the  property  by  Barr,  one  of  the  ad- 
ministrators of  the  decedent,  Bailey.  The  complainants  insist 
that  Barr  occupied  a  fiduciary  relation  to  the  property,  and  that 
the  purchase  falls  within  the  settled  rules  of  law,  which,  on 
grounds  of  public  policy,  prohibits  a  ti'ustee  from  purchasing 
property  held  in  trust.  And  they  ask  that  the  deed  to  Ban- 
may  be  held  to  be  a  deed  of  trust,  and  as  such  inuring  to  the 
benefit  of  the  complainants  as  the  legal  heirs  of  Bailey.  In  sup- 
port of  the  demurrer  to  the  bill,  it  is  contended:  1.  That  Barr 
did  not  stand  in  the  relation  of  trustee,  and  that  the  sale  and 
conveyance  vested  in  him  a  perfect  title  in  his  own  right.  2. 
That  as  the  estate  of  Bailey  was  largely  insolvent,  if  a  trust 
estate  can  be  created,  Barr  held  the  property  as  the  trustee  of 
the  creditors  of  Bailey,  who  alone  are  interested  in  the  question, 
and  that  the  creditors  not  being  made  parties  to  the  bill,  no  de- 
cree can  be  entered  in  the  case.  3.  That  if  these  complainants 
ever  had  a  claim  to  relief,  they  are  barred  by  the  lapse  of  time 
and  the  statute  of  limitations. 

It  is  not  proposed"  to  examine  the  numerous  cases  referred  to 
by  the  counsel  for  the  complainants  to  sustain  the  doctrine  that 
a  trustee  can  not  purchase  the  property  held  by  him  in  trust. 
It  is  undeniably  true,  that  while  some  courts  have  limited  the 
application  of  the  doctrine  to  cases  where,  from  the  facts,  there 
was  either  actual  or  constructive  fraud  on  Ae  part  of  the  trustee, 
the  current  of  decisions  is  against  the  validity  of  purchases  by 
any  one  holding  a  fiduciary  relation  to  the  property  sold,  Avithout 
any  inqitiry  as  to  the  circumstances  of  the  sale,  or  the  motives 
of  the  trustee  in  becoming  the  purchaser.  The  courts  hold,  with 
great  propriety  and  force  of  reasoning,  that  sound  policy  requires 
that  persons  in  a  fiduciary  character  should  have  no  temptation 
to  use  trust  property  for  their  own  benefit  and  to  the  injury  of 
the  cestui  que  trust;  and  if  the  present  case  falls  within  this 
principle,  the  relief  sought  for  by  these  complainants  must  be 
awarded,  unless  denied  to  them  on  other  grounds. 

But  the  Court  do  not  perceive  the  applicability  of  the  rule 
referred  to,  to  the  case  stated  in  this  bill.  Barr,  the  purchaser 
of  the  property  in  question,  was  one  of  three  administrators  of 
an  insolvent  estate.  Upon  a  proper  showing  to  the  Probate 
Court,  by  the  administrators,  that  it  was  necessary  to  sell  the 


376  SHARKLEY  v.  TAYLOR; 

real  estate  of  the  decedent  to  pay  debts,  an  order  for  that 
purpose  was  made,  under  which  Still  became  the  purchaser 
of  the  property.  The  administrators  made  return  of  the  sale, 
and  the  usual  order  for  its  confirmation  was  made,  and  also  an 
order  that  the  administrators  should  convey  the  "  premises  to  the 
purchaser."  A  deed  was  accordingly  executed,  which  vested 
the  legal  title  to  the  property  in  the  purchaser  Still.  From  that 
time  the  administrators  were  separated  from  all  connection  with 
it  as  fiduciaries.  It  appears  that  subsequently,  in  default  of 
the  payment  of  the  notes  given  by  the  purchaser  for  the  real 
estate  sold,  it  became  necessary  to  bring  suit  on  one  or  more  of 
these  notes,  in  which  suit  the  names  of  the  three  administrators 
were  used  as  plaintiffs.  A  judgment  was  obtained  by  the  ad- 
ministrators, and,  upon  execution  against  the  defendant,  the 
property  thus  purchased  by  him  at  the  sale  by  the  administrators, 
as  also  the  undivided  half  which  he  had  acquired  by  purchase 
from  Enness,  was  levied  upon.  Haying  been  duly  appraised  and 
advertised,  as  required  by  law,  it  was  offered  at  public  sale  by 
the  sheriff  of  Plamilton  County,  and  Barr,  being  the  highest  bid- 
der, was  the  purchaser.  The  sale  thus  made  was  confirmed  by 
the  proper  court,  and  in  pursuance  of  the  order  of  the  court,  the 
sheriff  conveyed  the  property  to  Barr. 

It  may  be  remarked  here,  that  there  is  no  allegation  in  the 
bill,  nor  any  ground  presented  for  an  inference,  that  these  pro- 
ceedings were  not  conducted  in  the  most  perfect  good  faith. 
The  sum  bid  for  the  property  by  Barr  being  two-thirds  its  ap- 
praised value,  after  applying  one-third  to  the  widow's  claim  of 
dower,  was  paid  to  the  administrators,  and  by  them  distributed 
to  the  creditors  of  the  estate.  Neither  is  there  any  averment  in 
the  bill  that  Barr  made  any  profit  for  himself  by  the  purchase. 

The  main  ground  on  which  courts  have  rested  their  condem- 
nation of  fiduciary  purchases  is,  that  the  trustee  has  control  of 
the  sale  of  the  property,  and  thus  is  exposed  to  the  temptation 
of  resorting  to  fraudulent  management  in  the  sale,  thereby  to 
subserve  his  own  interests  at  the  sacrifice  of  the  interests  of 
those  for  whom  he  is  the  trustee.  Hence,  at  a  sale  by  adminis- 
trators or  executors  of  property  belonging  to  their  decedent,  they 
are  not  allowed  to  become  purchasers,  for  the  reason  that  they 
appoint  the  time  and  place,  and  have  the  entire  management  of 


CIRCUIT  COURT,  SOUTHERN  DISTRICT  OF  OHIO.         377 

the  sale.  But  this  has  no  application  to  the  sale  at  which  Barr 
was  the  purchaser.  The  property  sold  to  him  was  not  trust 
property,  the  title,  legal  and  equitable,  having  been  vested  in 
Still,  the  defendant  in  the  execution.  It  was  levied  upon  and 
sold  to  satisfy  the  execution  against  him.  The  sale,  and  all  the 
proceedings  connected  with  it,  were  conducted  by  the  sheriff, 
the  officer  who  by  law  was  authorized  to  perform  this  duty, 
without  any  interference  or  attempted  control  on  the  part  of  Barr 
or  his  co-administrators. 

It  would  seem  to  be  a  clear  proposition  that  a  sale  thus  made 
is  not  liable  to  the  objections  which  usually  invalidate  a  fidu- 
ciary sale.  It  is  clearly  not  within  the  principle  on  which  such 
sales  are  held  to  be  void,  for  the  reason  that  the  purchaser, 
though  his  name  as  administrator  was  necessarily  used  in  the 
suit  against  Still,  had  no  control  over  the  sale.  It  was  impos- 
sible, therefore,  that  by  any  agency  on  his  part,  he  could  pre- 
vent the  fullest  competition  at  the  sale,  or  by  any  device  or 
management  effect  a  purchase  at  an  unfair  price. 

Two  cases  have  been  referred  to  by  counsel,  one  from  the 
Vermont  and  one  from  the  Georgia  Reports,  in  which  it  is  said 
the  court  ignored  the  distinction  between  a  purchase  by  an  ad- 
ministrator or  executor  of  property  held  as  the  representative 
of  a  decedent,  and  property  levied  on  to  satisfy  a  judgment  in 
which  an  administrator  or  executor  is  a  party  plaintiff.  I  have 
not  had  an  opportunity  of  referring  to  these  cases,  and  do  not, 
therefore,  know  the  precise  grounds  on  which  the  decisions  were 
placed.  But,  considering  the  distinction  intimated  as  obvious, 
and  as  entitled  to  a  controlling  influence  in  the  consideration  of 
the  question,  I  am  not  prepared  to  sanction  the  doctrine  which 
the  cases  cited  are  supposed  to  sustain.  It  is  not  within  the 
reason  of  the  rule  of  law  condemning  fiduciary  purchases,  and 
there  is  certainly  nothing  in  the  facts  presented  in  the  bill 
requiring  so  stringent  an  application  of  the  doctrine.  As  before 
intimated,  there  does  not  appear  to  have  been  any  unfairness, 
much  less  fraud,  in  the  purchase  of  the  property  in  question. 
It  was  sold  at  its  fair  value,  and  its  proceeds  applied  to  the  pay- 
ment of  the  debts  owing  by  the  estate  (a). 

(a)  Armstrong's  Appeal,  68  Penn.  State  (18  P.  F.  Smith),  409 :  The  wife  of  an 
administrator  purchased  land  at  his  sale  as  administrator,  made  by  order  of  the 


378  SHARKLEY   v.  TAYLOR. 

But  if  the  facts  presented  warranted  the  implication  that 
Barr,  the  purchaser  of  the  property,  can  be  viewed  as  having 
acquired  merely  a  trust  estate,  the  inquiry  may  properly  be 
made,  To  whose  benefit  did  the  trust  inure  I  The  estate  of  the 
decedent,  Bailey,  was  insolvent,  and  paid  only  fifty  cents  on  the 
dollar  of  the  debts  owing.  It  would  seem,  therefore,  that  his 
heirs  could  have  no  possible  interest  in  the  sale  and  disposition 
of  his  estate,  as  there  is  no  pretense  that  in  any  event  there 
would  have  been  any  surplus  for  distribution  after  the  payment 
of  the  debts.  If,  therefore,  there  is  any  ground  of  complaint 
against  the  administrators,  it  should  be  urged  by  the  creditors, 
and  not  by  the  heirs  of  Bailey.  But  the  creditors  are  not  par- 
ties to  this  bill,  and  ask  nothing  at  the  hands  of  this  Court ;  and 
this  is  a  full  answer  to  the  prayer  of  the  bill,  so  far  as  the  equity 
of  the  heirs  is  concerned. 

The  case  of  Chronistcr  v.  Busbey,  7  Watts  &  Serg.  152,  is 
cited  as  sustaining  the  doctrine  that  it  is  the  right  of  the  heirs 
to  impeach  a  sale  by  an  administrator  or  executor,  even  where 
the  estate  is  insolvent.  In  that  case,  however,  the  property  be- 
longed to  the  estate  of  which  the  administrator  was  the  repre- 
sentative. It  was,  in  fact,  a  sale  by  the  administrator,  and  of 
which  he  had  the  entire  control,  and  there  were  facts  in  the  case 
justifying  the  inference  of  fraud  on  the  part  of  the  administra- 
tor. It  was  possible  that  if  the  sale  had  been  fairly  made,  and 
the  property  sold  at  its  full  value,  there  might  have  been  a  re- 
siduum- for  the  heirs.  The  court  held,  therefore,  that  as  the  heirs 
had  a  remote  or  contingent  interest  in  the  sale,  it  was  compe- 
tent for  them  to  impeach  it  Avithout  the  interposition  of  the 
creditors  of  the  estate.  It  is  not  necessary  to  inquire  into  the 
correctness  of  the  decision  in  the  case  referred  to.  The  facts 

Orphan's  Court;  and  the  sale  was  confirmed.  Afterward  she  sold  at  an  advance 
of  $1,346.68.  At  a  still  later  period  the  administrator  filed  his  accounts  for  set- 
tlement, accounting  for  the  amount  for  which  the  property  was  sold.  On  excep- 
tions to  his  account,  the  same  was  referred  to  auditors,  who  reported  that  in  their 
opinion,  the  sale  to  the  wife  "was  entirely  bona  fide,  and  untainted  with  fraud." 
Notwithstanding,  they  charged  the  administrator  with  the  $1,346.68,  which  was 
allowed  by  the  Orphan's  Court,  and  Armstrong,  the  administrator,  appealed. 
Held,  that  the  .administrator  could  not  be  charged  with  the  profit  in  this  proceed- 
ing, and  that  by  the  confirmation  of  the  sale,  the  price  with  whifh  the  adminis- 
trator should  be  charged  was  judicially  ascertained. 


JAUDON  ».  THE  NATIONAL  CITY  BANK.  3^3^379  — 

in  that  case  have  no  analogy  to  those  in  the  case  before  the  Court, 
and  the  law  as  sanctioned  by  the  Pennsylvania  court  has  no 
application  to  this  case. 

Regarding  the  reasons  stated  as  conclusive  against  the  right 
of  the  complainants  to  the  relief  sought  for,  the  demurrer  is  sus- 
tained, and  the  bill  dismissed.  It  is  not,  therefore,  necessary  to 
inquire  or  decide  whether  the  complainants  are  barred  by  the 
statute  of  limitations  or  lapse  of  time. 


MARY  T.  B.  JAUDON  v.  THE  NATIONAL  CITY  BANK,  DUNCAN, 
SHERMAN  &  Co.,  et  al. 

[Decided  in  May,  1871,  in  the  United  States  Circuit  Court  for  the 
Southern  District  of  New  York,  by  Judge  SAMUEL  BLATCHFORD.  Re- 
ported in  8  Blatchford's  Cir.  Ct.  Rep.  430.] 

In  this  case,  persons  who  made  loans  of  money  to  a  trustee,  on  certificates  of 
stock,  and  afterward  sold  the  shares  of^stock  to  repay  the  loans,  were  held 
liable  to  ceslui  que  trust  for  the  proceeds  of  the  shares,  it  appearing  that  the 
certificates  stated  that  the  holder,  naming  him,  held  them  in  trust,  and  gave 
the  name  of  the  ceslui  que  trust;  that  the  transactions  of  loan  indicated  that 
the  trustee  was  not  selling  the  shares  in  the  ordinary  course  of  business,  as 
trustee,  but  that  he  was  borrowing  money,  for  his  private  use,  on  a  pledge 
of  what  was  in  his  hands  as  trust  property;  that  the  sales  of  stock  were 
made  by  the  lenders,  with  the  knowledge  that  the  proceeds  were  to  be  ap- 
plied to  pay  the  private  debts  of  the  trustee  to  the  lenders;  and  that  the 
lenders  applied  the  proceeds  to  pay  such  private  debts. 

A  trustee  stands  on  a  different  footing  from  an  executor,  or  an  administrator,  or 
even  a  guardian,  in  many  respects.  He  presumptively  holds  his  trust 
property  for  administration,  and  not  for  sale. 

Theron  B.  Strong,  for  plaintiff.  William  H.  Arnoux,  for  the 
National  City  Bank.  William  W.  M'Farland,  for  Duncan, 
Sherman  &  Co. 

BLATCHFORD,  J.:  The  plaintiff  is  the  wife  of  the  defendant, 
Charles  B.  Jaudon.  She  is  a  daughter  of  the  late  Commodore 
William  Bainbridge,  who  died  in  1833,  leaving  a  will,  under 
the  provisions  of  which  she  has  a  separate  estate  of  her  own, 
placed  by  the  will  in  trust  for  administration.  By  the  will,  the 
testator,  after  making  certain  legacies,  directed  that  all  his  real 


380  JAUDON  v.  THE  NATIONAL  CITY  BANK; 

estate  should  be  sold,  and  appointed  William  Lynch  and  Hugh 
Calhoun  to  be  trustees  to  receive  all  the  residue  of  his  estate, 
"  and  to  invest  the  same  in  the  stocks  of  the  United  States,  or  the 
stocks  or  funds  of  any  individual  State,  and  to  hold  the  same  in 
trust  for  the  following  purposes:"  (1.)  Twenty-eight  thousand 
dollars  to  be  invested  and  the  interest  of  it  to  be  paid  to  his  wife 
for  her  life,  and  at  her  death  such  stocks  or  funds  to  be  equally 
divided  among  his  four  daughters  (the  plaintiff  being  one),  u  the 
trust  to  remain  the  same  for  their  sole  use  and  benefit."  (2.) 
Enough  to  be  invested  to  create  an  annual  interest  of  $150,  to 
be  paid  to  his  sister  Mary  during  her  life,  and,  at  her  death,  the 
invested  amount  "  to  be  in  trust,  equally  divided "  between 
his  said  four  daughters.  (3.)  In  respect  to  each  one  of  said  four 
daughters,  an  equal  one-fourth  part  of  his  remaining  estate  to 
be  invested  in  the  funds  or  stocks  before  mentioned,  in  trust,  the 
interest  whereof  to  be  paid  to  the  daughter  for  her  sole  use  and 
benefit  during  her  life,  and  at  her  death,  the  amount  so  invested 
to  be  divided  equally  among  her  children.  By  a  codicil,  he 
directed  that  the  loan  which -he  held  of  the  city  of  Philadelphia, 
and  the  Southwark  loan  and  the  ground-rents  be  not  sold,  but 
be  considered  by  the  trustees  as  equal  to  the  stocks  or  funds 
before  mentioned.  The  trustees  named  in  the  will  were,  in  May, 
1835,  on  their  own  petition,  discharged  from  their  trust  by  the 
Court  of  Common  Pleas  for  the  city  and  county  of  Philadelphia, 
and  the  defendant,  Samuel  Jaudon,  was  at  the  same  time  ap- 
pointed by  that  court,  trustee  under  said  will,  for  the  widow,  the 
sister,  and  the  four  daughters,  and,  in  June,  1835,  he  received 
.from  the  out-going  trustees  all  the  trust  estate  held  by  them. 
At  the  death  of  the  testator,  a  considerable  portion  of  his  estate 
consisted  of  stock  of  the  State  of  Pennsylvania,  paying  an  in- 
tesest  of  five  per  cent  per  annum.  The  trustees  named  in  the 
will  made  no  change  while  they  continued  to  be  trustees,  in  any 
of  the  investments,  but  left  them  as  they  were  at  the  death  of 
the  testator.  Soon  after  Samuel  Jaudon  was  appointed  trustee, 
he  sold  the  Pennsylvania  stock  and  invested  its  proceeds  in 
stock  of  the  Delaware  and  Raritan  Canal  Company.  This  stock 
he  apportioned  among  the  trusts  created  by  the  will,  allotting 
to  the  trust  for  the  plaintiff  ninety-three  shares.  Although  this 
waa  an  investment  not  authorized  by  the  will,  the  plaintiff 


CIRCUIT  COURT,  SOUTHERN  DISTRICT  OF  N.  Y.        381 

approved  of  it,  and  from  time  to  time  received  from  the  trustee 
the  dividends  made  on  the  ninety-three  shares.  In  1857,  the 
widow  died,  and  the  Delaware  and  Raritan  Canal  stock,  which 
belonged  to  the  trust  for  her,  was  divided  by  the  trustee  among 
the  trusts  for  the  four  daughters,  twenty-eight  shares  of  it  going 
to  the  trust  for  the  plaintiff.  Thus  the  trust  for  the  plaintiff 
embraced  one  hundred  and  twenty-one  shares  of  Delaware  and 
Raritan  Canal  stock,  and  the  plaintiff  thereafter  received,  from 
time  to  time,  from  the  trustee,  the  dividends  made  on  the  one 
hundred  and  twenty-one  shares,  knowing  of  the  investment. 
Afterward,  some  property  which  had  belonged  to  the  testator 
was  sold,  and,  from  that  source  and  other  sources,  the  trustee 
came  to  hold  under  the  trust  for  the  plaintiff,  in  addition  to  the 
one  hundred  and  twenty-one  shares  of  canal  stock  $5,600  in 
United  States  stock,  known  as  five-twenty  bonds. 

The  bill  seeks  to  make  the  trustee,  Samuel  Jaudon,  respon- 
sible for  the  value  of  the  $5,600  of  United  States  stock  and  of 
one  hundred  and  seventeen  shares  of  the  canal  stock,  as  having 
been  disposed  of  by  him  in  breach  of  his  trust,  and  to  have  him 
removed  from  his  trust  and  another  trustee  appointed  in  his 
place.  It  also  seeks  to  make  the  defendants,  the  National  City 
Bank,  responsible  for  the  value  of  forty-seven  shares  of  the  canal 
stock,  and  to  make  the  defendants,  Duncan  and  others,  who 
compose  the  firm  of  Duncan,  Sherman  &  Co.,  responsible  for 
the  value  of  seventy  shares  of  the  canal  stock,  as  having  been 
received  by  them  respectively  from  the  trustee,  and  sold  and 
appropriated  to  their  use  respectively,  under  circumstances 
which  make  them  liable  equally  with  the  trustee,  to  the  plaintiff, 
for  the  breach  of  trust  committed  by  such  trustee. 

On  the  16th  of  October,  1865,  Samuel  Jaudon  applied  to  the 
National  City  Bank  for  a  loan  of  $6,000  on  a  pledge  or  hypothe- 
cation of  forty-seven  shares  of  the  stock  of  the  Delaware  and 
Raritan  Canal  Company,  evidenced  by  two  certificates  of  stock, 
one  for  nineteen  shares  and  one  for  twenty-eight  shares.  The 
$6,000  was  loaned  to  him  by  the  bank,  October  16th,  1865,  on 
that  security,  he  giving  to  the  bank  no  obligation  note  or  due- 
bill  for  the  loan,  but  merely  depositing  with  it  the  two  certifi- 
cates, the  loan  being  regarded  as  a  loan  strictly  on  demand,  but 
practically  as  one  for  three  months.  The  certificate  for  the 


382  JAUDON  v.  THE  NATIONAL  CITY  BANK; 

nineteen  shares  was  dated  January  27th,  1852,  and  certified 
that  "  S.  Jaudon,  trustee  for  Mrs.  Mar}7  T.  B.  Jaudon,"  was 
entitled  to  that  number  of  shares  in  the  capital  stock  of  the 
company,  transferable  on  the  books  of  the  company,  and  on  sur- 
render of  such  certificate,  only  by  him  or  his  legal  representa- 
tive. The  certificate  for  the  twenty-eight  shares  was  dated 
April  14th,  1864,  and  certified  that  "  S.  Jaudon,  trustee  of  Mrs. 
Mary  T.  B.  Jaudon,"  was  entitled  to  that  number  of  shares  in 
the  capital  stock  of  the  company,  transferable  on  the  books  of 
the  company  only  by  him  or  his  legal  representative.  Accom- 
panying the  two  certificates,  when  they  were  so  deposited  with 
the  bank,  but  on  a  separate  piece  of  paper,  was  an  instrument 
dated  April  18th,  18G4,  signed  "  S.  Jaudon,  Tr.  of  M.  T.  B. 
Jaudon,"  and  stating  that  "  Sam'l  Jaudon,  trustee  of  M.  T. 

B.  Jaudon,"  thereby   sold    unto   forty-seven  shares    ll  of 

the  joint  stock  of  the  Delaware  and  Raritan  Canal  Company, 
and  Camden  and  Amboy  Railroad  and  Transportation  Com- 
pany," standing  in  his  name  on  the  books  of  said  companies, 

and  appointed  his  attorney   to  transfer  such    stock.      On 

the  27th  of  November,  1865,  the  bank  loaned  to  Samuel  Jau- 
don the  further  sum  of  $3,500  on  a  pledge  of  the  same  forty- 
seven  shares  of  stock  with  other  securities.  He  repaid  this 
loan  of  $9,500,  with  interest,  on  the  17th  of  January,  1866. 
He  borrowed  from  the  bank  the  like  sum  of  $9,500  on  a 
pledge  of  the  same  securities,  on  the  19th  of  January,  1866. 
Tliis  transaction  of  the  borrowing  by  him  from  the  bank  the 
like  sum  of  $9,500  on  a  pledge  of  the  same  securities,  was  re- 
peated seven  times  more,  namely:  on  the  18th  of  April,  1866, 
the  19th  of  July,  1866,  the  13th  of  October,  1866,  the  19th  of 
January,  1867,  the  13th  of  April,  1867,  the  6th  of  July,  1867, 
and  the  12th  of  October,  1867.  Such  loan  on  the  19th  of  Jan- 
uary, 1866,  was  repaid,  with  interest,  on  the  llth  of  April, 

1866.  The  first  six  of  the  remaining  seven  loans  were  repaid, 
with   interest,  severally,  on  the    16th  of  July,  1866,  the    10th 
of  October,    1866,    the    14th   of   January,    1867,   the    10th  of 
April,  1867,  the  29th  of  June,  1867,  and  the  10th  of  October, 

1867.  The  loan  of  the  12th  of  October,  1867,  not  being  paid 
on  demand,   the  bank,   on  the  10th  of  December,   1867,  sold 
the  forty-seven  shares  of  stock,  at  the  request  of  Mr.  Jaudon, 


CIRCUIT  COURT,  SOUTHERN  DISTRICT  OF  N.  Y.         383 

for  the  net  sum  of  $5,897.90,  which  was  applied  on  account  of 
the  loan  on  the  llth  of  December,  1867.  The  securities  were 
returned  to  Mr.  Jaudon  every  time  he  paid  up  the  amount  of  a 
loan,  and  redelivered  to  the  bank  by  him  every  time  a  new  loan 
was  made  to  him. 

On  the  18th  of  July,  1867,  Samuel  Jaudon  applied  to  the 
defendants,  Duncan,  Sherman  &  Co.,  for  a  loan  of  $7,000,  which 
was  made  to  him  by  them  on  that  day,  on  the  pledge  or  hy- 
pothecation of  seventy  shares  of  the  stock  of  the  Delaware  and 
Raritan  Canal  Company,  evidenced  by  one  certificate  of  stock 
for  seventy  shares.  The  amount  was  loaned  on  that  security 
alone.  It  was  a  loan  at  ninety  days.  Whether  a  note  was 
given  for  it  or  not,  is  not  certain.  The  certificate  was  deposited 
with  Duncan,  Sherman  &  Co.  at  the  time  the  loan  was  made. 
The  certificate  was  dated  December  13th,  1851,  and  certified 
that  "  S.  Jaudon,  trustee  for  Mrs.  Mary  T.  B.  Jaudon,"  was  en- 
titled to  seventy  shares  in  the  capital  stock  of  the  company, 
transferable  on  the  books  of  the  company,  and  on  surrender  of 
such  certificate,  only  by  him  or  his  legal  representative.  Ac- 
companying the  certificate,  when  it  was  so  deposited  with  Dun- 
can, Sherman  &  Co.,  but  on  a  separate  piece  of  paper,  was  an 
instrument  signed  u  S.  Jaudon,  Trustee  of  M.  T.  B.  Jaudon," 
and  stating  that  "  S.  Jaudon,  Trustee  of  M.  T.  B.  Jaudon," 

thereby    sold    unto    seventy    shares    li  of   the    joint-stock 

of  the  Delaware  and  Ran  tan  Canal  and  Camden  and  Amboy 
Railroad  and  Transportation  Comp'ys,"  standing  in  his  name 

on  the  books  of  the   said   companies,  and   appointed  his 

attorney  to  transfer  the  stock.  On  the  16th  of  October,  1867, 
when  the  ninety  days  expired,  Mr.  Jaudon  obtained  from  Dun- 
can, Sherman  &  Co.,  on  the  same  stock,  a  further  loan  of  $600, 
and  at  the  same  time  gave  directions  to  them  to  sell  the  stock. 
Between  the  16th  of  October,  1867,  and  the  21st  of  October, 
1867,  the  seventy  shares  were  sold  by  Duncan,  Sherman  &  Co., 
for  the  net  sum  of  $8,699.12.  On  the  last-named  day,  the 
loans,  with  interest,  amounted  to  $7,729.88,  and  on  that  day, 
Duncan,  Sherman  &  Co.  applied  that  amount,  from  the  proceeds 
of  the  sale,  to  the  payment  of  the  loans  and  interest,  and  paid 
over  to  Mr.  Jaudon  the  remainder  of  the  proceeds,  amounting  to 
$969.24.  The  power  of  attorney,  accompanying  the  certificate 


384  JAUDONz/.  THE   NATIONAL  CITY  BANK; 

for  the  seventy  shares,  is  dated  October  IGth,  1807  (a  mistake 
for  1867),  and  that  date  was  probably  filled  in  October  16th, 

1867,  and  it  bears  the  signature,  as  a  witness  to  its  execution, 
of  Mr.  J.  C.  Hull,  the  cashier  of  Duncan,  Sherman  &  Co.,  who, 
at  the  direction  of  Mr.  William  B.  Duncan,  of  that  firm,  trans- 
acted the  business  of  receiving  the  certificate  and  transfer  and 
power  of  attorney,  from  Mr.  Jaudon,  and  furnishing  him  with 
the  money  loaned. 

The  sales  of  the  one  hundred  and  seventeen  shares  were 
made  under  the  power  of  attorney  before  named,  the  blanks 
therein  having  been  filled  up  at  the  office  of  the  company,  when, 
under  the  powers,  the  shares  were  transferred  on  its  books,  and 
the  certificates  were  surrendered.  Notwithstanding  the  sale  of 
the  shares,  Mr.  Jaudon,  in  February,  1868,  paid  to  the  plaintiff 
an  amount  of  money  equal  to  the  amount  of  the  dividend  then 
paid  on  the  one  hundred  and  seventeen  shares,  and  in  August, 

1868,  he  paid  to  her  the  sum  of  $205,  as  on  account  of  the  div- 
idend then  paid  on  such  shares.     Since  that  time  she  has  not 
received  any  thing  on  account  of  the  income  of  the  shares,  nor 
have  they  been  restored  to  the  trust.     The  plaintiff  did  not  know 
of  any  of  the  loans,  or  of  any  of  the  pledges  of  the  shares,  or 
of  the  sale  of  any  of  the  shares,  until  the  month  of  December, 
1868.     She   never    authorized    or  ratified  any  of  the  transac- 
tions.    Mr.    Jaudon    used    the   moneys  obtained    by  him  from 
the    bank,   and   from   Duncan,   Sherman    &  Co.,  on   the   loans, 
to  pay   which  the  stocks  were  sold,  to  discharge   indebtedness 
incurred  by  him  individually  in  making  investments  in  stock  of 
the  Broad  Top  Coal  and  Iron  Company,  which  he  anticipated 
would  be  remunerative ;  and,  if  they  were,  he  had  the  intention 
of  offering  to  the  plaintiff  shares  in  such  company,  to  replace  the 
one   hundred   and  seventeen   shares.      Such    investments   were 
made   by  him   in  his   individual  name.     The   plaintiff  had  no 
knowledge  of  such  use  of  the  moneys,  or  of  such  investments, 
or  of  such  intention.     The  investments  turned  out  to  be  worth- 
less, and  the  stock   was  never  offered  to  her.     Mr.  Jaudon  is 
insolvent,  and  the  trust  has  never  received  any  of  the  proceeds 
of  the  stock,  or  any  moneys,  in  replacement  thereof.     The  evi- 
dence shows,  that  when  Mr.  Jaudon  applied  to  Duncan,  Sherman 
&  Co.,  for  the  original  loan,  he  informed  Mr.  Duncan  about  his 


CIRCUIT   COURT,  SOUTHERN  DISTRICT  OF  N.  Y.        8H5 

having  made  investments  in  the  Broad  Top  Company,  and  made 
known  to  him  his  expectation  of  being  able  to  repay  the  loan 
from  the  fruits  of  such  investments. 

There  is  no  foundation  in  the  evidence  for  the  proposition 
that  Mr.  Jaudon  had  any  authority  from  the  plaintiff,  either 
special  or  general,  to  sell  or  dispose  of  the  one  hundred  and 
seventeen  shares,  or  to  pledge  the  same,  or  borrow  money  on 
them.  The  stock  was  a  valuable  stock.  The  forty-seven  shares 
sold  for  over  25  per  cent  net  above  par,  and  the  seventy  shares 
for  over  24  per  cent  net  above  par.  The  semi-annual  dividends 
upon  it  had  averaged  5  per  cent,  in  money,  and  it  had  occa- 
sionally made  dividends  in  stock  besides. 

On  these  facts  there  can  be  but  one  conclusion,  and  that  is, 
that  not  only  Mr.  Jaudori,  the  trustee,  but  the  bank  and  Dun- 
can, Sherman  &  Co.,  must  respond  to  the  trust  for  these  shares 
of  stock;  the  bank  for  the  forty-seven  shares,  and  Duncan, 
Sherman  &  Co.  for  the  seventy  shares.  The  certificates,  on 
their  face,  not  only  stated  that  Mr.  Jaudon  held  the  shares  in 
trust,  but  gave  the  name  of  the  plaintiff  as  the  cestui  que  trust. 
The  powers  of  attorney  indicated  that  he  was  transferring  the 
shares  so  held  by  him  in  trust.  The  transactions  of  loan  indi- 
cated, not  that  he  was  selling  the  shares  in  the  ordinary  course 
of  his  business,  as  trustee,  but  that  he  was  borrowing  money  for 
his  private  use,  on  a  pledge  of  what  was  in  his  hands  as  trust 
property.  The  sales  of  the  stock,  when  they  were  made  by  the 
pledges,  were  made  by  them  with  knowledge  that  the  proceeds 
were  to  be  applied  to  pay  the  private  debts  of  the  trustee  to  the 
pledgees,  and  the  pledgees  applied  the  proceeds  to  pay  such  pri- 
vate debts.  In  regard  to  Mr.  Duncan,  he  was  informed  that 
the  loan  was  to  be  repaid  by  Mr.  Jaudon  out  of  the  fruits  of 
investments  which  he  had  made  in  the  stock  of  a  company  which 
was  named/  That  stock  was  a  stock  which  Mr.  Duncan  was 
bound  to  know  was  a  security  in  which  it  was  unlawful,  by  the 
general  principles  of  law,  and  in  the  absence  of  special  au- 
thority, for  a  trustee  to  invest  trust  funds.  He  must,  therefore, 
be  held  chargeable  with  knowledge  that  the  loan  was  to  be  re- 
paid from  sources  with  which  the  trust  could  have  no  connection, 
and,  therefore,  from  sources  altogether  private  to  the  borrower. 
In  regard  to  the  bank,  the  making  of  ten  separate  loans  to  Mr. 

25 


336  JAUDON  v.  NATIONAL  CITY  BANK; 

Jaiulon,  running  through  a  period  of  two  years,  upon  the  pledge 
of  the  stock,  evidenced  by  such  certificates,  must  be  held  as 
charging  the  bank  with  notice  that  Mr.  Jaudon  was  borrowing 
the  money  for  his  private  uses,  on  a  pledge  of  trust  property. 
The  circumstances  were  such  as  to  put  the  parties  on  inquiry. 
Inquiry  would  have  directed  them  to  the  cestui  que  tmst,  and 
the  unlawfulness  of  the  transactions  would  have  been  disclosed. 
They  made  no  inquiry,  even  of  Mr.  Jaudon,  as  to  how  it  was 
that  he  was  borrowing  money  on  a  pledge  of  shares  held  by  him 
as  trustee.  The  case  is  not  even  one  of  a  sale  of  the  shares 
directly,  which  might  presumably  be  within  the  scope  of  the 
authority  of  a  trustee,  with  a  view  to  a  reinvestment  within 
such  authority.  A  trustee,  however,  stands  on  a  different  foot- 
ing from  an  executor  or  an  administrator,  or  even  a  guardian, 
in  many  respects.  A  trustee  presumptively  holds  his  trust  prop- 
erty for  administration,  and  not  for  sale  ;  and,  according  to  the 
well-settled  principles  of  equity,  a  pledge  by  him  of  certificates 
of  stock  like  those  in  this  case,  as  security  for  loans  of  money 
made  to  him  under  circumstances  like  these  in  this  case,  enti- 
tles the  cestui  que  trust  to  follow  the  property  into  the  hands  of 
the  pledgee  and  reclaim  it  from  him,  Avhere  he  has  received  the 
fruits  of  it,  and  there  was  in  fact  a  breach  of  trust  in  making 
the  pledge.  The  transactions  with  the  pledgees  in  this  case 
negatived  the  idea  that  Mr.  Jaudon  had  any  purpose,  in  borrow- 
ing the  money,  of  selling  the  stock,  and,  therefore,  negatived  the 
idea  that  his  action  could  be  that  of  a  trustee  selling  the  stock. 
He  said  plainly,  by  the  transactions,  that  he  did  not  wish  to  sell 
the  stocks ;  that,  as  between  him  and  the  trust,  no  such  thing  as 
a  sale  of  the  stocks  was  the  purpose  of  the  transactions ;  and  that 
he  intended  to  repay  the  borrowed  money,  and  reclaim  the  stocks. 
The  pledgees  had  reasonable  ground  for  believing,  when  they 
made  the  loans,  to  pay  which  the  stock  was  sold,  tli-at  Mr.  Jau- 
don intended  to  apply  the  money  loaned  to  his  private  uses. 
They  enabled  him  to  commit  the  breach  of  trust  which  he  com- 
mitted. What  he  did  was  accomplished  by  their  co-operation. 
The  law  implies  notice  to  them  of  the  terms  of  the  trust,  whose 
existence  the  certificates  disclosed.  It  was  negligence  in  them 
to  take  the  certificates  in  pledge  for  the  loans,  without  inquiry. 
Such  inquiry  of  the  plaintiff  would  have  shown  that  the  borrow- 


CIRCUIT  COURT,  SOUTHERN  DISTRICT  OF  N.  Y.        387 

ing  of  the  money  was  foV  no  purposes  of  the  trust.  They  must 
bear  the  consequences  of  their  negligence,  M'Leod  v.  Drum- 
mond,  17  Vesey,  152;  Field  v.  Scliieffelin,  7  Johns.  Ch.  150; 
Lowry  v.  Commercial  and  Farmers  Bank,  Ch.  J.  Taney's  De- 
cisions, 310;  Pendleton  v.  Fay,  2  Paige,  202,  205;  Shaw  v. 
Spencer,  100  Mass.  382,  389-392  ;  Bayard  v.  Farmers'  and  Me- 
chanics' Bank,  52  Penn.  232 ;  Baker  v.  Bliss,  39  N.  Y.  70,  73, 
76  ;  Carr  v.  Hilton,  1  Curtis'  C.  C.  390,  393. 

The  bill  has  been  taken  as  confessed  against  the  defendant, 
Samuel  Jaudon.  There  must  be  a  decree  that  he  account  for 
the  United  States  stock  appropriated  by  him  to  his  own  use, 
with  the  interest  that  would  have  been  received  thereon,  and  for 
the  one  hundred  and  seventeen  shares  of  the  stock  of  the  Canal 
Company,  and  for  the  dividends  thereon,  and  that  he  restore 
such  property  to  the  trust,  or  pay  its  value  into  Court.  There 
must  also  be  a  decree  against  the  bank  and  Duncan,  Sherman  & 
Co.  severally,  that  they  account  severally,  the  former  for  thp  forty- 
seven  shares,  and  the  latter  for  the  seventy  shares,  of  the  stock 
of  the  Canal  Company,  pledged  with  them  severally,  and  sold, 
and  for  all  dividends  thereon  since  made,  and  restore  such  shares 
and  property  to  the  trust,  or  pay  its  value  into  Court.  It  will  be 
referred  to  a  master  to  take  and  state  such  accounts,  allowing 
the  proper  credits.  All  other  questions  are  reserved  until  the 
coming  in  of  the  report  of  the  master  («). 

(a)  Breckenridge  v.  Glasse,  1  Craig  &  Phillips  (18  Eng.  Ch.),  126:  Part  of  a 
sum  of  money  which  had  been  raised  by  a  husband  upon  the  security  of  property 
comprised  in  his  marriage-settlement,  by  means  of  a  suppression  of  the  settle- 
ment, was  lent  by  him  to  the  trustee  of  the  settlement  upon  his  bond,  the  trus- 
tee being  ignorant  of  the  means  by  which  the  money  had  been  raised.  After 
the  death  of  the  husband,  the  wife,  who  was  entitled  to  a  life-interest  in  the  set- 
tled property,  with  remainder  to  her  children,  took  out  administration  to  her  hus- 
band, and  filed  a  bill,  in  her  own  name  and  in  the  names  of  her  children,  by 
herself  as  their  next  friend,  against  the  trustee — who  had  in  the  mean  time  taken 
the  benefit  of  the  insolvent  debtor's  act — praying  that  the  sum  due  upon  the  bond 
(which  the  widow,  as  administratrix,  offered  to  deliver  up),  might  be  replacedj 
with  interest,  upon  the  trusts  of  the  settlement.  Held,  that  the  widow  and  chil- 
dren had  a  clear  equity  to  follow  the  money  in  the  hands  of  the  trustee,  and  that 
they  would  have  had  the  same  equity  if,  instead  of  being  a  trustee,  he  had  been  a 
stranger;  and  semble,  that  such  a  claim  would  not  have  been  barred  by  the  trustee's 
discharge  under  the  insolvent  debtor's  act,  even  if  it  had  been  proved  (which  it 
was  not)  that  the  bond  debt  had  been  included  in  his  schedule. 


WALL   v.  COCKERELL, 


WALL  v.  COCKERELL,  et  als. 

[Decided  in  the  House  of  Lords  in  1862,  the  Lord  Chancellor  WESTBURY 
delivering  the  opinion,  and  Lord  CHELMSFORD  concurring,  reversing  the 
judgment  of  the  late  Lord  Chancellor  CAMPBELL.  Reported  in  10  House 
of  Lords  Cases,  229.] 

Where  money  is  intrusted  by  A  to  his  solicitor  for  investment,  but  without  any 
particular  investment  being  then  in  contemplation,  and  it  is  allowed  to  re- 
main in  the  hands  of  the  solicitor,  the  amount  becomes  a  debt  due  from  the 
solicitor  to  A.  If  the  solicitor  afterward  misapplies  the  money,  and  to  cover 
his  fraud  obtains  from  another  client.  B,  upon  a  false  representation,  a 
transfer  of  B's  equitable  interest  under  a  previously  executed  mortgage,  no 
money  of  A  being  then  paid  to  B,  the  transfer  thus  obtained  may,  on  B's 
discovering  the  fraud,  be  set  aside  in  equity,  for  no  money  srf  A  having  been 
received  by  B  at  the  time  the  transfer  was  executed,  no  interest  passed  to  A 
by  its  execution. 

What  circumstances  may  constitute  acquiescence  of  B  in  the  solicitor's  fraud, 
and  deprive  him  of  the  right  to  relief. 

The  Solicitor-General,  Sir  R.  Palmer,  and  Mr.  John  Pearson, 
for  appellant,  Mr.  Selwyn  and  Mr.  Surraye,  for  respondents. 

THE  Lord-Chancellor  WESTBURY:  My  Lords,  the  respond- 
ents are  the  trustees  of  the  marriage-settlement  of  Mr.  and  Mrs. 
Grieve.  They  employed,  as  their  solicitors,  Henry  and  Cheslyn 
Hall,  who  were  in  partnership  as  solicitors  in  London.  A  sum 
of  15,0007.  having  become  payable  to  the  respondents  as  such 
trustees,  they  directed  it  to  be  paid  to  Messrs.  Hall,  to  be  in- 
vested upon  mortgages  to  be  found  by  Messrs.  Hall.  The  money 
was  accordingly,  on  the  4th  February,  1853,  paid  into  the 
banking-house  of  Messrs.  Dixon  &  Company,  the  bankers  of 
Messrs.  Hall,  to  the  credit  of  their  private  account.  The  money 
was  not  in  any  manner  separated  or  distinguished  from  the 
moneys  belonging  to  the  Messrs.  Hall.  No  particular  securities 
were  in  contemplation  at  the  time  of  such  payment.  The  sum  of 
15,000/.,  therefore,  became  in  law  a  debt  due  to  the  respondents 
from  Messrs.  Hall. 

The  first  use  which  the  Messrs.  Hall  made  of  part  of  the 
money  so  acquired  was  to  apply  5,OOOZ.  in  discharge  of  a  debt 
due  from  them  to  their  bankers.  They  then  invested  10,0007. 


IN  THE  HOUSE  OF  LORDS.  389 

upon  mortgage  of  an  estate  belonging  to  a  Mr.,  Commerell,  and 
represented  to  their  clients,  the  respondents,  that  the  whole  of 
the  15,000?.  had  been  duly  invested,  and  upon  one  security. 
Interest  on  the  15,000?.,  as  if  it  had  been  so  invested,  was  paid 
by  Messrs.  Hall  to  the  parties  entitled  under  the  trust. 

In  the  year  1854,  the  respondents  became  dissatisfied  with 
Messrs.  Hall,  and  in  July  of  that  year  they  were  discharged 
from  being  solicitors  to  the  respondents,  and  the  securities  of  the 
15,000?.  were  demanded. 

Messrs.  Hall  were  the  confidential  solicitors  of  the  appellant, 
who  was  a  very  young  man,  entitled  for  life  to  large  real  estates, 
of  which  the  Halls  had  the  entire  management.  They  were  also 
the  trustees  and  executors  of  the  will  of  the  appellant's  brother, 
and  had  the  whole  control  of  the  property  which  the  appellant 
was  entitled  to  under  that  will.  The  appellant  was  completely 
in  their  power,  and  placed  in  them  the  most  absolute  confidence. 
The  Halls,  therefore,  formed  the  design  of  getting  the  appellant 
to  execute  deeds  which  they  might  hand  over  to  the  respondents 
as  the  securities  for  the  5,000?.  which  they  had  appropriated  to 
their  oAvn  use.  Accordingly,  they  prepared  two  deeds  of  mort- 
gage of  the  life-interest  of  the  appellant  in  the  Worthy  estate, 
one  for  the  sum  of  4,000?.  and  another  for  the  sum  of  1,000?. 
The  mortgage  for  4,000?.  is  made  to  bear  date  on  the  1st 
March,  1853.  The  mortgage  for  1,000?.  bears  date  the  1st 
August,  1853. 

Policies  of  insurance  on  the  life  of  the  appellant  are  included 
in  both  secui'ities ;  but  the  policy  included  in  the  mortgage  for 
4,000?.  was  effected  in  1849,  and  that  included  in  the  mortgage 
for  1,000?.  was  not  effected  until  the  5th  July,  1853,  which  ap- 
pears to  be  the  reason  why  that  deed  was  made  to  bear  date  the 
1st  August,  1853. 

The  respondents  having  become  very  peremptory  in  their 
demands  for  the  securities,  Messrs.  Hall,  on  the  1st  September, 
1854,  delivered  the  mortgage  deeds  for  10,000?.,  together  with 
these  two  mortgages  for  4,000?.  and  1,000?.,  and  the  policies  of 
insurance,  to  the  solicitor  of  the  respondents.  They  were  ac- 
cepted without  difficulty,  and  no  inquiry  appears  to  have  been 
made  5  and  yet  the  circumstances  were  such  as  should  have 
awakened  very  grave  suspicions  on  the  part  of  the  trustees,  who 


390  WALL  v.  COCKERELL, 

had  already  seen  fit  to  discharge  Messrs.  Hall  from  being  their 
solicitors.  On  the  9th  February,  1853,  Messrs.  Hall  had  writ- 
ten to  Mr.  Grieve  that  they  had  "  concluded  the  arrangements  as 
to  the  new  mortgage;"  namely,  the  mortgage  for  the  15,000?. 
On  the  20th  April,  1853,  Mr.  Cheslyn  Hall  had  written  to  Mr. 
Grieve  in  these  words  :  "The  15,000?.  was  [were]  lent  in  one  sum 
to  one  party."  These  definite  statements  were  contradicted  by 
the  securities  delivered. 

When  the  appellant  executed  the  deed  of  1st  March,  1853,  is 
not  clearly  ascertained,  but  it  certainly  was  not  long  after  the 
date  of  the  instrument.  As  to  the  deed  dated  the  1st  August, 
1853,  it  is  proved  that  it  was  not  even  prepared  until  the  latter 
end  of  August,  1854,  when  Messrs.  Hall,  no  longer  able  to  evade 
the  demands  of  the  respondents,  were  compelled  to  complete  the 
making  up  of  securities  for  the  5,000?.  that  were  due  from  them. 

The  appellant  swears  that  he  knew  nothing  of  the  deeds,  and 
that  he  must  have  executed  them  on  the  representations  of 
Messrs.  Hall  that  they  were  instruments  of  a  different  nature. 
But  it  is  not  necessary  for  him  to  put  his  case  so  high  ;  it  is 
sufficient  to  suppose  that  he  executed  the  deeds  in  the  faith  that 
the  respondents  had  paid,  or  would  pay,  the  consideration  moneys 
to  Messrs.  Hall,  as  his  solicitors  and  agents. 

The  legal  estate  in  the  property  comprised  in  the  mortgage 
deeds  was,  and  is,  outstanding,  and  the  deeds  would  operate  in 
equity  only  upon  such  equitable  interest  as  the  appellant  was 
entitled  to.  But  no  interest  whatever  would  pass  to  the  respond- 
ents until  the  consideration  moneys  were  either  actually  paid  or 
applied  unto  or  for  the  use  of  the  appellant,  or  paid  by  the  re- 
spondents under  such  circumstances  as  would  estop  the  appellant 
from  denying  that  he  had  received  them. 

On  the  question  of  payment,  the  case  is  exceedingly  plain 
and  simple.  No  payment  of  the  5,000?.  can  be  pretended  to 
have  been  actually  made  by  the  respondents,  except  the  pay- 
ment of  the  15,000?.  on  the  4th  February,  1853,  which  was  a 
deposit  by  them  in  the  hands  of  their  own  agents,  Messrs.  Hall, 
for  the  purpose  of  being  invested  on  proper  securities.  The 
sum  of  5,000?.  was  misapplied  by  their  own  agents,  who  were 
intrusted  with  it  long  before  the  appellant's  securities  were  exe- 
cuted, and  it  is  not  pretended  that  one  shilling  of  the  5,000?. 


IN  THE  HOUSE  OF  LORDS. 


was  subsequently  paid  or  applied  by  the  Messrs.  Hall  unto  or 
for  the  use  of  the  appellant. 

The  respondents  rely  on  the  fact  that  the  deeds,  with  re- 
ceipts for  the  consideration  moneys,  signed  by  the  appellant, 
were,  on  the  1st  September,  1854,  delivered  to  the  solicitor  of 
the  respondents,  and  they  contend  that  the  appellant  is  thereby 
estopped  from  denying  the  receipt  of  the  money.  And  if  the 
respondents  were  in  a  condition  to  prove  that  they  had  ever 
paid  any  sum  of  money  to  the  Messrs.  Hall  for  the  use  of  the 
appellant,  or  (as  already  observed)  that  the  Messrs.  Hall  had 
applied  any  part  of  the  respondent's  money  for  the  benefit  of 
the  appellant,  the  respondents  would  be  so  far  entitled  to  retain 
the  benefit  of  the  mortgage.  But  these  are  the  particulars  in 
which  their  case  is  wanting. 

When  the  mortgage  deeds  were  handed  over  to  the  respond- 
ents on  the  1st  September,  1854,  they  paid  nothing  on  the  faith 
and  credit  of  the  appellant's  receipts,  but  took  the  deeds,  trust- 
ing to  the  representations  of  Messrs.  Hall,  to  whom  they  had 
confided  their  money,  and  by  whom  that  money  had  been  spent 
before  these  mortgages  were  thought  of;  and  they  now  want  to 
convert  this  payment  to  the  Messrs.  Hall  as  their  own  agents, 
into  a  payment  to  them  as  the  agents  of  the  appellant. 

But  the  decree  which  the  respondents  have  obtained  from 
the  late  Lord  Chancellor  is  vested  on  the  ground  of  acquiescence 
and  confirmation  by  the  appellant  of  the  respondent's  title. 
The  words  of  Lord  Chancellor  CAMPBELL  are,  "  I  proceed  upon 
the  ground  that  the  plaintiff  has  confirmed  the  validity  of  the 
mortgages  with  the  knowledge  or  means  of  knowledge  of  the 
material  facts  of  the  case."  Now,  the  material  facts  of  the  case 
are  the  facts  which  constitute  the  appellant's  equity  or  title  to 
relief.  It  is  for  the  sake  of  clearly  explaining  the  true  nature 
of  the  appellant's  equity  that  I  have  made  the  antecedent  full 
statement  of  the  case.  The  material  facts  that  constitute  the 
plaintiff's  title  are,  that  no  sum  of  money  was  ever  paid  by  the 
respondents  to  the  appellant  or  his  agents  on  the  credit  or  for 
the  purpose  of  these  mortgages,  and  that  all  which  the  respond- 
ents have  done  has  been  to  abstain  from  demanding  repayment 
of  a  sum  of  5,OOOZ.,  which  they  had  intrusted  to  their  own  agents, 
Messrs.  Hall,  on  the  faith  of  the  assurances  of  Messrs.  Hall  that 


"392  ~-39'  GILLILAND   v.   CRAWFORD, 


they  had  paid  that  sum  to  the  appellant,  whereas,  in  truth,  the 
Messrs  Hall  had  never  paid  or  given  credit  for  any  part  of  that 
sum  to  the  appellant. 

It  is  most  clear  that  these  facts  were  not  Jcnown  to  the  ap- 
pellant until  the  month  of  April,  1859.  The  respondents  knew 
from  the  beginning,  that  unless  the  Messrs.  Hall  had  paid  or 
applied  for  the  use  of  the  appellant  the  debt  which,  on  the  4th 
February,  1853,  became  due  from  them  to  the  respondents,  no 
consideration  had  been  given  for  the  mortgage ;  and  the  appel- 
lant, until  some  time  in  April,  1859,  had  reason  to  believe,  both 
from  the  demands  of  the  respondents  and  the  assurances  of 
Messrs.  Hall,  that  the  5,000?.  had  been  bona  fide  paid  by  the 
respondents  to  the  Messrs.  Hall  on  the  credit  and  for  the  pur- 
poses of  the  mortgages.  The  bill  is  filed  within  a  month  after 
the  truth  is  discovered. 

Under  these  circumstances,  it  is  impossible  to  impute  to  the 
appellant  laches  or  acquiescence,  or  an  intention  of  confirming 
the  respondents'  title.  The  burden  of  proving  such  a  case  would 
lie  on  the  respondents,  and  could  not  be  discharged,  except  by 
proving  that  the  appellant  was  aware  of  the  time  and  manner  in 
which  the  respondents'  money  was  deposited  with  the  Messrs. 
Hall,  and  of  the  fact  that  no  part  of  it  had  been  applied,  for  his 
own  use  or  benefit.  v  The  case  is  plain  and  simple,  as  soon  as  the 
true  nature  of  the  appellant's  equity  is  rightly  apprehended.  I 
shall,  therefore,  move  your  Lordships  to  reverse  the  decree  of 
Lord  Chancellor  CAMPBELL,  and  to  direct  that  the  petition  of 
rehearing  presented  to  him  be  dismissed  with  costs.  The  decree 
of  the  Court  of  Chancery  was  accordingly  reversed. 


GILLILAND  v.  CRAWFORD. 

[Decided  in  the  Vice-Chancellor's  Court  of  Ireland,  in  1869,  HEDGES  E. 
CHATTERTON,  Vice-Chancellor.  Reported  in  4  Irish  Reports  (Equity  Se- 
ries), 35.] 

Executor. —  Tenant  for  life — Right  of  executor  who  httt  expended  money  in  improving 
tettalor't  real  property,  for  the  moneys  expended — Right  of  tenant  for  life  against 
remaitider-man — Right  of  trustee  as  against  cestui  que  (rust. — C  was,  at  (lie  time 


IN  THE  IRISH  VICE-CHANCELLOR'S  COURT.  393 

of  his  death,  seized  of  a  plat  of  ground  upon  which  he  had  commenced  to 
build  certain  houses.  By  his  will  he  devised  and  bequeathed  all  his  real 
and  personal  property  to  his  father  for  life,  upon  trust,  as  to  one  moiety  of  the 
rents  and  profits  for  himself,  and  as  to  the  other  for  other  parties,  with  re- 
mainder over.  The  father  became  the  personal  representative  of  C,  and  after 
his  death  expended  large  sums  of  money  in  completing  the  houses.  Held, 
that  the  father  was  not  entitled  to  a  charge  upon  the  plat  of  ground  for  the 
moneys  expended  by  him,  either  as  a  tenant  for  life,  trustee,  or  personal 
representative  of  C. 

THIS  case  came  up  on  a  motion  for  a  decree.  The  opinion 
of  the  Vice-Chancellor  states  sufficient  facts  in  the  case  to  make 
the  points  passed  upon  by  him  sufficiently  clear  to  be  well  under- 
stood by  the  profession. 

Mr.  M'Causland,  Q.  C.,  Mr.  Carson,  Q.  C.,  and  Mr.  H. 
Holmes,  for  the  plaintiff.  Mr.  Pilldngton,  Q.  C.,  and  Mr.  J.  A. 
Byrne,  for  Mr.  and  Mrs.  Wilson  and  their  children. 

By  the  VICE- CHANCELLOR:  The  claim  of  the  representa- 
tive  of  the  Rev.  James  Crawford  has  been  put  forward  upon 
two  distinct  grounds :  first,  as  that  of  a  tenant  for  life  to  have 
or  charge  upon  the  inheritance  for  expenditure  in  permanent 
improvements ;  and,  secondly,  as  that  of  a  trustee  to  have  a 
charge  upon  the  trust  estate.  He,  to  a  certain  extent,  filled 
both  characters ;  for  he  took  a  legal  estate  in  the  whole  for  his 
own  life,  being  beneficially  entitled  for  life  to  one  undivided 
moiety,  and  a  trustee  for  life  of  the  other  moiety,  the  annual 
proceeds  of  which  were  to  go  to  Mrs.  Wilson,  for  the  benefit  of 
her  children,  the  minor  defendants.  On  the  death  of  James 
Crawford,  the  trust  estate  given  to  him  ceased,  and  the  persons 
entitled  in  remainder  took  legal  estates  in  the  freeholds.  It  ap- 
pears to  me,  therefore,  that  the  case  must  be  considered  in  both 
views  ;  and  I  shall  deal  with  it  first  with  respect  to  the  relation 
of  tenant  for  life  and  remainder-man  on  which  it  was  chiefly 
rested.  The  relief  prayed  by  the  bill  has  been  admitted  to  be 
too  extensive,  and  it  is  now  sought  to  have  the  expenditure  de- 
clared to  be  a  charge  only  upon  that  piece  of  ground  on  part  of 
which  the  buildings  have  been  erected.  I  shall  assume  that  the 
building  of  these  houses  had  caused  a  considerable  permanent 
addition  to  the  value  of  this  whole  piece  of  ground.  The  cases 
of  Nairn  v.  Majoribanlts,  3  Russell,  582 ;  Caldccott  v.  Brown, 


394  GILLILAND  v.  CRAWFORD, 

2  Hare,  144,  and  others  which  have  been  referred  to  in  the 
course  of  the  argument,  establish  the  general  principle  that  a 
tenant  for  life  who  lays  out  his  money  in  making  substantial  im- 
provements, by  which  the  value  of  the  inheritance  has  been  per- 
manently increased,  does  not  thereby  acquire  any  right  to  a 
charge  upon  the  inheritance  for  any  portion  of  such  outlay,  and 
that 'an  inquiry  as  to  how  much  the  estate  in  remainder  has  been 
benefited  by  such  outlay  will  not  be  directed.  Consequently, 
the  mere  increase  in  value  of  this  piece  of  ground  by  Rev. 
James  Crawford's  outlay  gives  his  representative  no  right 
against  the  estate  in  remainder.  But  it  was  contended  on  the 
part  of  the  plaintiff  that  the  fact  of  these  buildings  having  been 
partly  erected  by  the  testator  took  the  case  out  of  this  general 
rule ;  and  in  support  of  this  contention,  Hibbert  v.  Coolie,  1  S.  & 
S.  552,  and  Dent  v.  Dent,  30  Bea.  363,  were  relied  on.  In  the 
former  of  these  cases,  the  building  was  a  mansion-house  for  the 
owner  of  the  estate,  and  in  the  latter,  the  only  claim  of  a  similar 
nature  which  was  allowed  was  also  for  the  completion  of  a  man- 
sion-house commenced  by  the  testatrix.  There  were  other 
claims  in  Dent  v.  Dent,  which  were  disallowed,  and  which  it  is 
important  to  consider.  It  is  necessary  to  ascertain  whether 
these  claims  in  Hibbert  v.  Cooke  and  Dent  v.  Dent  were  allowed 
because  the  building  had  been  commenced,  or  because  it  was  a 
mansion-house.  It  is  evident  from  the  consideration  of  the  claims 
disallowed  in  Dent  v.  Dent,  that  the  intentions  of  the  testatrix 
to  make  the  permanent  improvements  claimed  for  did  not  justify 
the  tenant  for  life  in  executing  them  with  a  view  to  obtaining  a 
charge  on  the  inheritance.  It  was  there  clearly  established  that 
the  testatrix  had  intended  to  build  the  farm-houses,  farm-build- 
ings, and  cottages  erected  by  the  plaintiff  upon  parts  of  the  estate 
in  place  of  others  which  had  become  ruinous  and  unfit  for  use, 
and  the  plans  of  some  of  them  had  been  prepared  and  submitted 
to  her.  The  Master  of  the  Roljs  gave  the  tenant  for  life  a  charge 
upon  the  estate  for  the  sums  expended  upon  the  mansion-house, 
but  not  for  those  expended  upon  the  farm-houses,  farm-buildings, 
and  cottages. 

I  do  not  think  that  the  commencement  of  a  building  is  enough 
to  account  for  the  distinction,  and  if  it  were,  I  do  not  know  where 
I  could  draw  the  line.  If  there  had  been  only  an  expenditure 


IN  THE  IRISH  VICE-CHANCELLOR'S  COURT.  395 

of  five  pounds,  would  it  be  enough  ?  It  would  be  impossible  to 
draw  any  line  as  to  what  expenditure  in  the  life-time  was  and 
was  not  sufficient.  The  case  of  Joliffe  v.  Myford  shows  that  the 
commencement  of  a  work  with  the  full  intention  of  completing 
it  is  not  sufficient,  although  the  claim  of  the  tenant  for  life  to 
have'  it  completed  out  of  the  assets,  which  is  analogous,  was 
aided  by  an  obligation  expressly  imposed  on  him  to  keep  the 
column  in  repair.  It  appears  to  me  that  the  claims  allowed  in 
these  cases  were  allowed  because  the  partly  erected  building  was 
a  mansion-house ;  nor  is  that  a  mere  shadowy  distinction.  The 
mansion-house  is  meant  for  the  enjoyment  of  the  persons  suc- 
cessively in  possession  of  the  estate.  It  is  not  intended  to  be 
let,  or  to  be  advertised  for  sale,  and  is  generally  placed  on  the 
most  desirable  site  on  the  estate ;  therefore,  if  it  be  not  com- 
pleted, the  money  already  spent  on  it  must  be  lost,  and  the  build- 
ing must  fall  into  ruin  and  become  an  unsightly  incumbrance. 
But  here  no  such  considerations  can  apply,  for  these  houses  were 
in  no  way  intended  for  the  personal  occupation  of  the  persons 
entitled  to  the  property.  They  were  erected  for  the  purpose  of 
being  disposed  of.  There  was  nothing  to  prevent  their  being  let 
as  they  stood  at  the  death  of  the  testator;  and  the  materials 
provided  by  him  might  have  been  probably  advantageously  dis- 
posed of  with  them,  and  used  by  a  tenant  for  their  completion. 
Therefore,  the  non-completion  of  them  by  the  tenant  for  life  did 
not  necessarily  lead  to  a  loss  of  the  outlay  already  made,  nor 
the  inconvenience  of  becoming  a  ruin,  and  thus  disfiguring  the 
estate.  I  am,  accordingly,  of  opinion,  that  the  expenditure  did 
not  come  within  the  principle  of  Hibbert  v.  CooJce,  or  the  first 
claim  in  Dent  v.  Dent. 

It  was  next  argued  that  this  is  a  case  between  trustee  and 
cestui  que  trust ;  but  I  can  not  hold  that,  after  the  death  of  the 
Rev.  James  Crawford,  any  such  relation  existed,  and  there  is 
not  now  any  trust  estate  subsisting  which  could  support  any 
such  lien.  Besides,  Rev.  James  Crawford  was  only  a  trustee, 
even  during  his  life,  as  to  one  undivided  moiety.  But  even 
if  any  such  relation  were  continuing,  and  if  he  intended  to  avail 
himself  of  it  to  complete  the  buildings  out  of  his  own  money, 
and  then  to  claim  a  lien  upon  the  trust  property,  on  the  ground 
that  it  was  desirable  that  this  expenditure  should  be  made  for  the 


396  GILLILAND  v.  CRAWFORD. 

benefit  of  all  concerned,  he  could  have  come  to  this  Court  for  its 
sanction  before  making  it.  I  quite  admit  that  this  Court  will 
ratify  an  act  when  done  by  a  trustee  lona  fide,  which  it  would 
have  authorized  beforehand  if  asked  so  to  do. 

But  I  think  there  would  have  been  very  great  difficulty  in 
getting  this  Court  to  sanction  the  expenditure  here.  I  assume 
bona  fides,  and  that  James  Crawford  acted  on  a  reasonable  ex- 
pectation of  profit  from  the  buildings,  and  that  the  premises 
were  completed  without  extravagant  and  wasteful  expenditure. 
But  Avhat  has  been  the  result?  That  there  has  been  an  expend- 
iture of  ,£4,500  for  the  completion  of  houses,  a  considerable 
portion  of  the  expense  of  erecting  which  had  been  defrayed  by 
the  testator — I  do  not  know  how  much,  but  it  must  have  been 
considerable — and  the  only  produce  is  .£200  a  year,  including 
the  value  of  the  sites.  I  am  told  that  this  is  a  speculation 
which  is  likely  to  turn  out  profitable,  but  I  deny  the  right  of  a 
trustee  to  speculate  with  the  trust-money.  Then  I  do  not  see 
how  I  could  separate  the  part  of  this  expenditure  that  was 
proper  from  that  which  was  not,  especially  as  it  is  not  alleged 
that  there  was  any  mala  fides  in  the  dealings  with  the  property. 
It  can  not  be  said  that  the  property  would  have  been  valueless 
if  this  expenditure  was  not  incurred.  The  plot  was  laid  out, 
and  might  have  been  let  or  sold  as  building  ground.  Part  has 
been  so  let. 

I  find  that  in  Dent  v.  Dent  a  question  was  raised  whether  or 
not  an  inquiry  should  be  directed  in  the  first  instance.  The 
Master  of  the  Rolls  says,  at  page  368:  "It,  however,  appeared 
to  me  that  it  was  not  a  proper  course  to  reserve  the  considera- 
tion of  whether  these  sums  ought  or  ought  not  to  be  allowed 
until  after  the  parties  had  been  put  to  a  considerable  expense  in 
ascertaining  the  amount  laid  out,  and  the  circumstances  under 
which  it  had  been  done.  I  therefore  thought  it  my  duty  to  con- 
sider whether,  if  all  the  facts  alleged  were  proved,  I  should 
allow  the  plaintiff  any  thing."  In  my  opinion,  no  account  would 
be  useful.  There  is  a  question  still,  whether,  even  if  I  were  to 
declare  this  expenditure  a  charge  upon  this  property,  the  plain- 
tiff could  derive  any  benefit  from  it.  There  is  a  large  number 
of  unpaid  creditors  who  have  a  right  to  be  paid  out  of  this 
property,  if  the  general  personal  estate  is  not  sufficient  to  pay 


M'CORMICK  v.  GROGAN.  3^*1    ~  397— 

them,  and   it   is  not   certain  that  the   personal   estate  will   be 
enough. 

On  all  these  grounds,  I  think  that  this  bill  must  be  dismissed ; 
and  as  I  do  not  see  any  reason  for  taking  it  out  of  the  ordinary 
rule,  I  must  dismiss  it  with  costs.  Bill  dismissed  with  costs. 


JAMES  M'CORMICK,  APPELLANT,  v.  WILLIAM  GROGAN, 
RESPONDENT. 

[Decided  in  the  House  of  Lords,  on  Appeal,  in  1869,  Lord  Chancellor 
HATHERLEY  and  Lord  WESTBURY  delivering  opinions.  Reported  in  4  En- 
glish and  Irish  Appeals,  82.] 

Will — Trust — C  made  a  will  leaving  his  whole  property,  real  and  personal,  to  G, 
whom  he  also  appointed  his  executor.  When  about  to  die,  C  sent  for  G,  and 
in  a  private  interview,  told  him  of  the  will,  and  on  G's  asking  whether  that 
was  right,  said  he  would  not  have  it  otherwise.  C  then  told  G  where  the 
will  was  to  be  found,  and  that  with  it  would  be  found  a  letter.  This  was 
all  that  was  known  to  have  passed  between  the  parties.  The  letter  named 
a  great  many  persons  to  whom  C  wished  sums  of  money  to  be  given  and  an- 
nuities to  be  paid;  but  it  contained  several  expressions  as  to  G  carrying 
into  effect  the  intentions  of  the  testator  as  he  "might  think  best,"  and  this 
sentence,  "I  do  not  wish  you  to  act  strictly  on  the  foregoing  instructions,  but 
leave  it  entirely  to  your  own  good  judgment  to  do  as  you  think  I  would,  if 
living,  and  as  the  parties  are  deserving;  and  as  it  is  not  my  wish  that  you 
should  say  any  thing  about  this  document,  there  can  not  be  any  fault  found 
with  you  by  any  of  the  parties,  should  you  not  act  in  strict  accordance  with 
it."  G  paid  money  to  some  of  the  persons  mentioned  in  the  letter,  but  not 
to  all.  Held,  that  in  this  case  there  was  not  any  trust  created  binding  on  G. 

IN  this  case  the  Court  of  Appeal  in  Chancery  in  Ireland  (con- 
sisting of  Lord  Chancellor  BREWSTER,  and  Lord  Justice  CHRIS- 
TIAN), had  reversed  a  decretal  order  of  the  Lord  Chancellor 
BLACKBUKNE,  made  under  the  following  circumstances  :  Abraham 
Walker  Craig,  a  linen  merchant  of  Belfast,  died  on  the  29th  of 
September,  1854,  unmarried,  leaving  several  relatives,  including 
his  father  and  three  brothers,  him  surviving.  In  July,  1851, 
he  had  made  a  will  in  these  terms:  "I  devise  and  bequeath  the 
whole  of  my  property,  both  real  and  personal,  to  my  most  sin- 
cere and  valued  friend,  Mr.  William  Grogan,  of  Wellington  Place, 
Belfast,  and  appoint  him  my  sole  executor.  In  witness,"  etc. 


398  M'CORMICK  v.  GROGAN, 

In  the  evening  of  the  29th  of  September,  1854,  the  testator 
having  been  suddenly  attacked  with  cholera  (of  which  he  died 
a  few  hours  afterward),  sent  for  Mr.  Grogan,  and  communicated 
to  him,  in  a  private  interview,  the  fact  of  having  made  the  will 
long  ago,  leaving  all  his  property  to  Mr.  Grogan.  The  respond- 
ent (according  to  his  evidence  in  the  cause)  asked  the  testator, 
"Is  that  right?"  to  which  the  testator  answered,  "It  shall  be  no 
other  way,"  and  then  told  him  that  he  would  find  the  will  in  a 
desk,  and  a  letter  with  it.  No  assent  was  asked  from  Mr.  Grogan 
as  to  the  contents  of  the  letter.  The  testator  died  in  a  short 
time  afterward,  and  a  brother  of  his  opened  the  desk,  and  there 
found  an  envelope  addressed  to  himself  in  the  handwriting  of 
the  deceased.  The  envelope  had  inside  it  these  words:  "My 
dear  John,  I  request  you  wrill  deliver  to  my  sincere  friend,  Mr. 
Grogan,  the  inclosed  in  the  event  of  my  death.  Yours  sincerely, 
A.  W.  Craig,  Falls  Factory,  14th  July,  1851."  The  envelope 
contained  the  will,  and  a  letter  in  the  following  form  : 

"Mr  DEAR  MR.  GROGAN, — Seeing  so  much  litigation  and  quarreling  arise  in 
consequence  of  property  being  left  in  many  hands,  to  prevent  same  in  my  own 
case,  I  have  thought  it  best  to  invest  the  whole  of  mine  in  your  hands,  as  you 
will  see  by  the  inclosed  will,  and  well  knowing  you  will  carry  out  my  intentions 
to  the  best  «f  your  ability,  I  now  state  them.  I  leave  to  my  beloved  father 
£100  per  annum  during  his  life.  To  my  sisters  Mary  Ann  and  Sarah,  my  be- 
loved cousin  Emily  Benn,  and  my  aunt  Orr,  and  my  much  esteemed  friend  Miss 
Kitty  Cochrane,  £30  per  annum  each,  during  their  lives.  To  my  beloved  cousins 
Mary  Ann  and  Sarah  Walker  (daughters  of  my  late  uncle  James),  my  esteemed 
relative  Elizabeth  Benn  (daughter  of  my  cousin  James),  my  relative  George  Craig, 
of  Ballymore,  near  Tandrager,  my  much  esteemed  friend  Charles  Woods,  of  Moy- 
gashel,  my  valued  friend  Robert  M'Kinstry,  £20  per  annum  each,  during  their 
lives.  To  my  much  esteemed  friend  Miss  Allen,  and  her  sisters  Bess  and  Jane, 
Mrs.  Alice  M'Clclland,  widow  of  my  late  friend  Robert  M'Clelland,  of  Banbridgc, 
my  present  servant,  Prudence  M'Veigh,  my  late  flax-buyer,  James  Sandford,  of 
Tiuidrager,  my  present  foreman  hacklcr,  James  M'Cormick,  my  carpenter,  Patt 
Gullery,  my  brother  John's  friends,  George  Gainford,  Richard  Gainford,  and  Da- 
vid Griffin,  and  to  Mrs.  Trainer,  widow  of  my  late  foreman,  Thomas  Trainer,  £10 
per  annum  each,  during  their  lives.  To  John  O'Neill,  one  of  my  present  loft^ 
men,  and  to  my  man-servant,  Robert  M'Cann,  £10  per  annum  each,  during  their 
lives,  and  at  their  deaths  the  same  sums  to  their  widows  during  their  lives,  should 
they,  or  either  of  them,  survive  their  husbands.  To  my  most  esteemed  Ann  Al- 
exander, widow  of  my  late  friend  James  Alexander,  of  Rosehill,  £140  per  annum 
during  her  life,  and  at  her  death  to  her  four  children  forever,  in  the  following 
proportions:  if  living,  to  her  daughter  Mary,  £50  per  annum,  and  to  her  three 
sons,  Joseph,  Samuel,  and  John,  £30  per  annum  each  ;  should  any  of  them  die 
before  their  mother  and  not  have  children,  then  the  share  of  the  deceased  to  go 


IN  THE  HOUSE  OF  LORDS.  399 

to  the  survivors  in  equal  proportions,  or  in  whatever  proportion  you  may  con- 
sider them  deserving  of.  After  arranging  for  the  due  payment  of  the  foregoing 
in  whatever  manner  you  may  think  best,  I  wish  the  remainder  of  my  property 
to  go  to  yourself  and  to  my  brothers  Thomas,  James,  and  John,  in  equal  propor- 
tions, and  to  be  sold  or  not  as  you  may  consider  best,  for  the  benefit  of  all  parties. 
I  do  not  wish  you  to  act  strictly  to  the  foregoing  instructions,  but  leave  it  en- 
tirely to  your  own  good  judgment  to  do  as  you  think  I  would,  if  living,  and  as 
the  parties  are  deserving;  and  as  it  is  not  my  wish  that  you  should  say  any 
thing  about,  this  document,  there  can  not  be  any  fault  found  with  you  by  any  of 
the  parties  should  you  not  act  in  strict  accordance  with  it.  I  believe  I  hare  no 
other  request  to  make,  and  the  only  excuse  I  can  offer  for  imposing  such  trouble 
upon  you  is,  that  I  would,  if  required,  have  undertaken  a  similar  task  for  you. 
With  best  wishes  for  your  happiness  and  all  connected  with  you,  believe  me, 
your  sincere  friend,  A.  W.  CRAIG." 

"There  are  a  few  friends  which  I  have  a  sincere  regard  for,  and  which  I 
would  like  to  serve,  if  in  my  power,  but  did  not  include  them  in  the  foregoing, 
knowing  many  of  them  do  not  require  and  probably  would  not  accept  a  gift 
from  me;  and,  besides,  I  feel  I  might  not  be  justified  in  making  more  bequests, 
lest  the  property  should  not  turn  out  so  as  to  leave  a  sufficient  surplus  after 
paying  them,  but  give  you  the  names  of  them  below,  and  should  any  of  them  or 
their  connections  which  you  may  consider  worthy  of  assistance  ever  require  the 
same,  and  that  there  is  a  large  surplus  left  after  paying  the  foregoing,  I  request 
you  will  set  aside  such  a  sum,  before  making  any  division  with  my  brothers,  as 
you  may  consider  sufficient  to  meet  any  case  or  cases  that  may  thereafter  arise; 
but  should  there  not  be  property  sufficient  after  paying  the  foregoing  to  meet 
such  cases,  I  have  no  doubt,  if  you  will  mention  to  my  brother  John  my  wishes, 
he  will  himself  contribute,  if  in  his  power,  to  such  cases  when  they  occur.  The 
names  are  as  follows:  James  Bristow,  William  Valentine,  Thomas  Valentine* 
Daniel  Foster,  James  Carson's  family,  children  of  my  late  friend  Bryce  Smyth, 
John  T.  Carter,  Robert  Brown,  William  Martin,  James  Scott,  butter  merchant, 
Thomas  Geys  Hadden,  St.  Rollox,  Glasgow,  Foster  Connor,  Mrs.  F.  Connor  and 
all  her  sisters,  children  of  my  late  friend  Mr.  Thomas  Mackey,  of  Glenbank,  Mrs. 
Knox,  Mrs.  Malcomson,  and  all  my  deserving  relatives,  but  particularly  my  aunt 
and  uncle  Benn  and  their  children. 

"Having  written  the  foregoing  in  a  hasty  manner,  and  perhaps  in  such  a 
way  as  you  may  not  clearly  understand  it,  I  leave  it  to  yourself  to  carrj'  out  the 
intentions  as  you  may  think  best,  and  should  the  property  not,  yield  sufficient,  at 
first  to  pay  the  annuities  and  leave  a  good  surplus,  you  can  defer  as  many  of 
them  as  you  find  least  deserving,  and  can  best  afford  to  wait  until  the  outer  park 
becomes  more  productive.  A.  W.  C." 

The  respondent,  conceiving  himself  to  be  left,  under  the  terms 
of  the  will,  absolute  master  of  the  property,  took  out  probate, 
and  though  never  recognizing  that  any  legal  or  equitable  obliga- 
tion was  imposed  on  him  by  the  letter,  paid  ,£5,000  to  each  of 
the  three  brothers  of  the  testator,  and  other  sums  of  money  to 
other  people,  but  did  not  pay  the  annuities  of  all  the  people 
mentioned  in  the  letter,  and  among  the  rest  he  did  not  pay  the 


400  M'CORMICK  T/.    GROGAN, 

annuity  to  M'Cormick.  A  cause  petition  was  presented  by 
M'Cormick  to  have  the  trusts  created  by  the  letter  as  affecting 
the  will,  declared ;  and  Lord  Chancellor  BLACKBURNE  declared 
that  the  letter  constituted  a  trust  in  favor  of  M'Cormick,  and 
made  an  order  accordingly.  His  decision  was  reversed  in  the 
Court  of  Appeal,  Irish  Law  Reports  (1  Equity),  313.  This 
appeal  was  then  brought. 

Mr.  H.  Laic,  Q.  C.,  of  the  Irish  bar,  and  Mr.  Jessel,  Q.  C., 
for  the  appellant.  Sir  R.  Palmer,  Q.  C.,  Mr.  George  A.  C.  May, 
Q.  C.,  of  the  Irish  bar,  and  Mr.  A.  M.  Porter,  also  of  the  Irish 
bar,  appeared  for  the  respondent,  but  were  not  called  on  to 
address  the  House. 

The  Lord  Chancellor  HATHERLEY  gave  a  lengthened  opinion, 
concluding  that  the  judgment  of  the  Court  of  Appeal  in  Ireland 
was  correct,  and  should  be  affirmed  by  the  House  of  Lords  (a). 

Lord  WESTBURY  :  My  Lords,  I  should  not  deem  it  necessary 
to  add  any  thing  to  what  has  fallen  from  my  noble  and  learned 
friend,  were  it  not  for  the  feeling  of  respect  which  I  entertain 
for  the  able  arguments  of  the  counsel  for  the  appellant. 

My  Lords,  the  jurisdiction  which  is  invoked  here  by  the 
appellant  is  founded  altogether  on  personal  fraud.  It  is  a  juris- 
diction by  which  a  court  of  equity,  proceeding  on  the  ground  of 
fraud,  converts  the  party  who  has  committed  it  into  a  trustee  for 
the  party  who  is  injured  by  that  fraud.  Now,  being  a  jurisdic- 
tion founded  on  personal  fraud,  it  is  incumbent  on  the  Court  to 
see  that  a  fraud,  a  mains  animus,  is  proved  by  the  clearest  and 
most  indisputable  evidence.  It  is  impossible  to  supply  pre- 
sumption in  the  place  of  proof,  nor  are  you  warranted  in  deriv- 
ing those  conclusions  in  the  absence  of  direct  proof,  for  the 


(a)  The  opinion  of  Lord  Chancellor  HATHEHLEY  is  quite  lengthy,  and  enters 
inlo  ft  careful  examination  of  the  testimony.  Aside  from  this  examination,  the 
opinion  of  Lord  WKSTBURY  gives  all  the  points  of  law  and  equity  made  by  the 
Lord  Chancellor  in  a  more  brief  and  compact  form.  Inasmuch  as  the  entire 
statement  of  facts  is  given,  and  because  of  the  greater  brevity  of  Lord  WEST- 
BURY'S  opinion,  that  of  the  Lord  Chancellor  is  omitted,  with  the  recommendation, 
however,  that  the  learned  reader  will  not  omit  an  examination  of  the  In  tier  able 
opinion  upon  this  very  interesting  rule  of  equity  jurisprudence.  See  6  English 
and  Irish  Appeals,  87. 


IN  THE  HOUSE  OF  LORDS.  401 

purpose  of  affixing  the  criminal  character  of  fraud,  which  you 
might  by  possibility  derive  in  a  case  of  simple  contract.  The 
Court  of  Equity  has  from  a  very  early  period,  decided  that  even 
an  act  of  Parliament  shall  not  be  used  as  an  instrument  of  fraud ; 
and  if  in  the  machinery  of  perpetrating  a  fraud  an  act  of  Par- 
liament intervenes,  the  Court  of  Equity,  it  is  true,  does  not  set 
aside  the  act  of  Parliament,  but  it  fastens  on  the  individual  who 
gets  a  title  under  that  act,  and  imposes  upon  him  a  personal 
obligation,  because  he  applies  the  act  as  an  instrument  for  ac- 
complishing a  fraud.  In  this  way  the  Court  of  Equity  has  dealt 
with  the  Statute  of  Frauds,  and  in  this  manner,  also,  it  deals 
with  the  Statute  of  Wills.  And  if  an  individual  on  his  death- 
bed, or  at  any  other  time,  is  persuaded  by  his  heir-at-law,  or 
his  next  of  kin,  to  abstain  from  making  a  will,  or  if  the  same 
individual,  having  made  a  will,  communicates  the  disposition  to 
the  person  on  the  face  of  the  will  benefited  by  that  disposition, 
but,  at  the  same  time,  says  to  that  individual  that  he  has  a  pur- 
pose to  answer  which  he  has  not  expressed  in  the  will,  but  which 
he  depends  on  the  disponee  to  carry  into  effect,  and  the  disponee 
assents  to  it,  either  expressly  or  by  any  mode  of  action  which 
the  disponee  knows  must  give  to  the  testator  the  impression  and 
belief  that  he  fully  assents  to  the  request,  then,  undoubtedly, 
the  heir-at-law  in  the  one  case,  and  the  disponee  in  the  other, 
will  be  converted  into  trustees,  simply  on  the  principle  that  an 
individual  shall  not  be  benefited  by  his  own  personal  fraud. 
You  are  obliged,  therefore,  to  show  most  clearly  and  distinctly 
that  the  person  you  wish  to  convert  into  a  trustee  acted  malo 
animo.  You  must  show  distinctly  that  he  knew  that  the  testator 
or  the  intestate  was  beguiled  and  deceived  by  his  conduct.  If 
you  are  not  in  a  condition  to  affirm  that  without  any  misgiving 
or  possibility  of  mistake,  you  are  not  warranted  in  affixing  on 
the  individual  the  delictum  of  fraud,  which  you  must  do  before 
you  convert  him  into  a  trustee. 

Now,  are  there  any  indicia  of  fraud  in  this  case  ?  The  first 
thing  which  it  is  incumbent  on  the  party  to  make  out  is,  not 
only  that  the  testator  communicated  to  Mr.  Grogan  that  the 
letter  contained  some  directions  touching  the  ownership  of  his 
property  different  from  what  appear  on  the  face  of  the  will,  but 
you  must  also  prove  that  the  testator  considered  that  Mr.  Grogan 

26 


402  M'CORMICK  v.  GROGAN. 

had  accepted  the  obligation,  and  had  made  a  promise  to  carry 
those  different  dispositions  into  effect.  But  when  we  examine 
the  evidence,  it  amounts  merely  to  this,  that  Mr.  Grogan,  like 
an  honest  man,  at  first  expressed  his  surprise,  and  even  remon- 
strated with  the  testator  as  to  the  disposition  which  he  had  made. 
The  testator  is  not  represented  as  telling  Mr.  Grogan,  "  That 
disposition  is  not  the  real  one,  the  real  disposition  is  contained 
in  the  letter;"  but  the  testator  asserts  that  he  will  have  no 
other  disposition  made  of  his  property  ;  and  the  meaning  of  that 
is  very  clearly  shown  (as  was  observed  by  my  noble  and  learned 
friend)  when  you  connect  the  letter  with  the  will,  from  which  it 
is  plain  that  the  testator  meant,  "  I  will  not  have  any  other  dis- 
position than  that ;  I  place  you  in  my  shoes,  and  give  you  the 
absolute  dominion  over  my  property  which  I  have  myself,  and 
leave  you  at  liberty  to  carry  out  my  present  wislies,  or  not  to 
carry  them  out,  according  to  your  discretion,  which  shall  be  ab- 
solute and  uncontrolled."  Even  if  that  letter  had  been  commu- 
nicated to  Mr.  Grogan,  there  would  have  been  no  trust  in  favor 
of  any  individual.  But  there  is  nothing  in  the  evidence  that 
amounts  to  more  than  this,  that  the  testator  told  him,  "  I  will 
have  my  property  disposed  of  in  the  way  in  which  1  tell  you  I 
have  disposed  of  it  by  will,  and  you  will  find  a  letter  in  con- 
nection with  my  will."  And  when  we  come  to  the  evidence, 
there  is  nothing  to  be  extracted  from  that  evidence  that  can  be 
carried  beyond  this,  that  the  individual  to  whom  those  words 
were  addressed  supposed,  and  naturally  supposed,  that  the  letter 
would  have  some  connection  with  the  property.  My  Lords,  it 
is  impossible  to  hold  that  that  amounts  to  a  distinct  promise,  the 
breach  of  which  would  constitute  a  fraud ;  for  you  can  not  con- 
stitute a  fraud  in  this  matter  unless  you  find  that  there  is  a  dis- 
tinct and  positive  promise,  the  non-fulfillment  of  which  brands 
the  party  with  disgrace  as  having  personally  imposed  on  the 
testator.  There  is  nothing,  I  repeat,  in  the  circumstances  of  this 
case  that  would  warrant  us  in  arriving  at  that  conclusion  ;  and 
there  is  nothing,  therefore,  to  justify  the1  appellant  in  coming 
here  to  fasten  that  personal  imputation  upon  the  respondent,  and 
then  to  derive  from  that  a  conclusion  of  trust  in  favor  of  himself. 
I  am  sorry  that  I  am  compelled  to  accede  to  the  motion  of 
my  noble  and  learned  friend,  that  this  appeal  should  be  dismissed 


RE  HOARE'S   TRUSTS.  -39*7     ~ 403— 


with  costs ;  but  it  is  absolutely  necessary  that  it  should  be  so, 
because  it  is  a  case  where  a  right  of  property  is  claimed,  and  is 
sought  to  be  enforced  through  the  medium  of  fastening  an  impu- 
tation of  fraud,  for  which  there  is  no  justification.  Cases  of  that 
nature  eminently  deserve  to  be  dismissed  with  costs,  and  such, 
I  apprehend,  will  be  the  conclusion  to  which  the  House  will 
come  in  this  case. 

Lord  COLENSAT  concurred. 

Lord  CAIRNS:  My  Lords,  I  entirely  concur  in  the  motion 
which  has  been  made,  and  in  the  observations  that  have  been 
made  by  those  of  your  Lordships  who  have  spoken. 

Order  affirmed,  and  appeal  dismissed  with  costs. 


RE  HOARE'S  TRUSTS. 

[Decided  in  the  High  Court  of  Chancery,  in  1863,  by  Sir  JOHN  STUART, 
Vice- Chancellor.  Reported  in  4  Giffard's  Ch.  Rep.  254.] 

Where  the  draft  of  a  supposed  settlement  in  contemplation  of  the  marriage  of 
an  infant  ward  of  Court  containing  a  covenant  to  settle  after-acquired 
property,  but  no  provision  as  to  a  second  marriage,  was  approved  by  the 
intended  husband  but  never  executed,  though  a  post-nuptial  settlement  in 
different  terms  was  executed,  the  Court  varied  the  latter  settlement  by 
adding  the  covenant  as  to  after-acquired  property. 

BY  an  order  made  on  the  application  of  Sir  J.  H.  Lethbridge, 
the  dividends  of  certain  property  bequeathed  to  his  children 
were  ordered  to  be  paid  to  him  for  their  maintenance  and  edu- 
cation during  their  minorities,  or  until  further  order.  This 
order  was  relied  on  as  constituting  the  children  wards  of  Court. 
The  share  in  the  trust  funds  belonging  to  Julia,  one  of  the  infant 
daughters,  consisted  of  2,159?.  185.  3<1  bank  annuities,  and  a 
small  sum  of  cash. 

On  the  28th  January,  1860,  Major  H.  Walker,  who  was 
about  to  marry  Miss  Julia  Lethbridge,  at  the  request  of  Sir  John 
Lethbridge  wrote  to  his  solicitors,  begging  that  they  would  make 
arrangements  for  settling  the  money  belonging  to  the  lady 


404  RE  HOARE'S  TRUSTS, 

conjointly  on  her  and  himself.  On  the  21st  February,  1860, 
a  draft  settlement  containing  the  following  covenant  for  the  set- 
tlement of  the  lady's  subsequently  acquired  property  was  sent 
to  Major  Walker :  "  And  it  is  hereby  agreed  and  declared  that 
if  the  said  Julia  Decima  Lethbridge  now  is,  and  if  after  this  said 
intended  coverture  she  or  the  said  Hercules  Walker  in  her  right 
shall  become  seized,  possessed,  or  entitled  to  any  real  or  per- 
sonal estate  of  the  value  of  200?.  or  upward  for  any  estate  or 
interest  whatsoever,"  except  jewels,  etc.,  which  it  was  thereby 
agreed  and  declared  should  belong  to  the  said  Julia  D.  Leth- 
bridge for  her  separate  use,  "  then  and  in  every  such  case  the 
said  Hercules  Walker  and  Julia  Decima  Lethbridge,  and  all  other 
necessary  parties,  shall  at  the  cost  of  the  trust  premises,  as  soon 
as  circumstances  will  permit,  and  to  the  satisfaction  of  the  trus- 
tees or  trustee  hereof,  convey,  assign,  and  assure  the  said  real 
and  personal  property  to,  or  otherwise  cause  the  same  to  be  in- 
vested in  the  said  trustees  or  trustee  hereof,"  upon  the  trusts 
therein  declared. 

On  the  9th  March,  1860,  Major  Walker  returned  the  draft 
without  having  raised  any  objections.  The  marriage  was  solem- 
nized from  the  house  of  Sir  J.  Lethbridge  on  the  15th  March, 
I860,  with  the  consent  of  Sir  J.  Lethbridge,  the  young  lady 
being  then  eighteen  years  of  age,  but  no  settlement  was  exe- 
cuted on  that  occasion.  Shortly  afterward,  Major  Walker  re- 
quested the  trustees  to  transfer  the  funds  into  his  wife's  name, 
but  they  refused  on  the  ground  that  Sir  J.  Lethbridge  had  con- 
sented to  the  marriage  on  the  faith  of  the  settlement  which  had 
been  approved.  In  the  May  subsequent  the  trustees  paid  the 
fund  into  court,  under  the  provisions  of  the  Trust  Relief  Act. 

On  the  7th  February,  1861,  a  post-nuptial  settlement  of  the 
sum  of  2,159Z.  18s.  3d.  stock  was  executed  by  Major  Walker. 
It  contained  the  ordinary  provisions  for  the  settlement  of  per- 
sonalty on  marriage,  but  made  no  provision  for  the  children  of 
Mrs.  Walker  by  any  future  husband ;  neither  did  it  contain  a 
covenant  by  Major  Walker  to  settle  his  wife's  after-acquired 
property. 

Major  and  Mrs.  Walker  and  the  trustees  then  presented  a 
petition,  praying  for  payment  out  of  court  to  the  trustees  of  the 
above  sum  of  stock. 


IN  THE  ENGLISH  HIGH  COURT  OF  CHANCERY.          405 

Upon  that  petition  coming  on,  on  the  1st  March,  1861,  an 
order  was  made  directing  the  chief  clerk  to  inquire  whether  any 
and  what  settlement  of  the  fortune  of  the  infant  had  been  made, 
and  if  so,  whether  according  to  any  and  what  ante-nuptial 
agreement  for  a  settlement,  and  whether  any  and  what  further 
or  other  settlement  ought  to  be  made. 

On  the  10th  July,  18G2,  the  chief  clerk  certified  that  the 
post-nuptial  settlement  of  the  7th  February,  1861,  had  been 
executed  by  Major  Walker  and  the  trustees,  which  comprised 
the  fund  in  court,  and  the  other  property  of  the  lady,  which  was 
reversionary ;  that  there  had  been  no  ante-nuptial  agreement  for 
a  settlement ;  that  Mrs.  Walker  was  entitled  to  certain  legacies, 
and  to  a  sum  of  money  as  one  of  the  next  of  kin  of  a  lady  de- 
ceased; and  that  "a  further  settlement  ought  to  be  made  of  the 
property  comprised  in  the  settlement  of  the  7th  February,  1861, 
and  of  all  other  the  real  and  personal  property  of  or  to  which 
Mrs.  Walker,  at  the  time  of  her  marriage,  was  seized,  possessed, 
or  entitled,  and  of  any  property,  either  real  or  personal,  of  which 
she,  or  Major  Walker  in  her  right,  might,  at  any  time  during 
coverture,  become  seized,  possessed,  or  entitled,  of  the  value  of 
200?.  or  upward,  and  that  such  settlement  should  include  therein 
the  children  of  Mrs.  Walker  by  any  future  husband,  as  well  as 
the  children  of  the  existing  marriage,  and  to  be  in  such  form  as 
should  be  approved  by  the  court." 

Sir  J.  Lethbridge,  who  had  liberty  to  attend  the  proceedings 
in  chambers,  now  moved  to  vary  the  certificate,  by  striking  out 
the  words,  "  there  was  not  any  ante-nuptial  agreement  for  a  set- 
tlement," and  substituting  "there  was  an  ante-nuptial  agreement 
for  settling  all  the  property  of  the  said  Julia  Decima  Walker." 

Major  Walker  and  his  wife  also  moved  to  vary  the  certificate 
by  striking  out  that  part  of  the  certificate  which  found  that  a 
further  settlement  ought  to  be  made  of  the  wife's  property,  and 
substituting  for  those  words  that  no  further  settlement  ought  to 
be  made  thereof. 

Mr.  Craig  and  Mr.  Hoare  appeared  for  the  trustees.  Mr. 
Bacon  and  Mr.  Springall  Thompson,  for  Sir  J.  Lethbridge. 

The  VICE-CHANCELLOR:  As  to  the  provision  in  the  case  of 
a  second  marriage,  I  do  not  think  it  can  be  maintained.  The 


406  RE  HOARE'S  TRUSTS. 

marriage  was  contracted  by  the  husband  on  the  faith  of  the  draft 
agreement,  and  by  that  he  is  bound,  but  no  further. 

This  case  comes  within  the  principle  laid  down  in  Long  v. 
Long,  2  S.  &  S.  119,  by  Sir  JOHN  LEACH,  and  in  Austen  v.  Hdl- 
sey,  by  Lord  ELDON,  and  upon  that  principle  the  Court  is  bound 
to  secure  the  interest  of  this  lady. 

In  Long  v.  Long,  the  court  went  further  than  it  is  necessary 
to  go  in  this  case,  because  in  this  case  the  marriage  having  taken 
place  on  the  faith  of  the  settlement,  which  was  prepared  in  draft 
and  appi'oved  by  the  intended  husband,  it  is  not  necessary  that 
the  Court  should  require  any  provision  to  be  added  to  the  settle- 
ment as  to  the  children  of  a  future  marriage.  In  this  respect, 
therefore,  the  settlement  executed  will  not  be  varied.  The  order 
therefore  will  be  made  on  the  motion  to  vary  the  chief  clerk's 
certificate. 

The  chief  clerk  was  [not]  right  in  finding  that  there  was  no 
agreement  for  a  settlement,  because  the  marriage  took  place 
after  the  draft  settlement  had  been  shown  to  the  intended  hus- 
band, and  he  raised  no  objection  to  it.  Though,  therefore,  there 
is  enough  to  bind  him  in  the  view  of  this  Court  to  execute  a 
settlement  and  to  induce  the  Court  to  order  him  to  do  so,  yet  it 
would  not  be  necessary  to  execute  the  settlement. 

The  costs  of  the  trustee  will  come  out  of  the  funds,  but  no 
other  order  as  to  costs. 

Ordered :  That  the  chief  clerk's  certificate  finding  that  there 
was  no  ante-nuptial  settlement  be  varied  and  read  as  if  the  said 
certificate  did  not  contain  that  finding ;  and  on  the  motion  of  the 
petitioners  to  vary  the  certificate  no  order ;  and  on  the  petition, 
on  further  consideration,  this  Court  doth  order  that  a  covenant 
be  indorsed  on  the  settlement  as  follows :  The  within-named 
Hercules  Walker,  for  himself,  his  heirs,  executors,  and  assigns, 
doth  hereby  covenant,  promise,  and  agree  with  the  said  W. 
Walker  [the  trustees]  that  if  the  said  J.  D.  Walker  was  at  any 
time  of  her  marriage,  or  the  said  H.  Walker  in  her  right,  shall 
have  become  seized,  possessed  of,  or  entitled  to  any  real  or  per- 
sonal property  of  the  value  of  200?.  or  upward,  or  for  any  estate 
or  interest  whatever,  except  jewels,  trinkets,  ornaments,  plate, 
pictures,  books,  prints,  and  other  articles  of  a  like  nature,  which 
it  is  hereby  declared  shall  belong  to  the  said  J.  D.  Walker  foi 


WILLIAMS  v.  WILLIAMS.  >f03  -407  "" 

her  separate  use,  then  and  in  every  such  case  the  said  H.  Walker 
and  J.  D.  his  wife,  and  all  other  necessary  parties,  if  any,  shall 
at  the  cost  of  the  within-mentioned  trust  funds,  as  soon  as  cir- 
cumstances will  permit,  and  to  the  satisfaction  of  trustees  or 
trustee,  convey,  assign,  and  assure  the  said  real  or  personal 
property,  or  cause  the  same  to  be  vested  in  the  trustees  or  trus- 
tee of  within-mentioned  trust  funds  upon  the  trusts  within  de- 
clared of  the  matters  within  assigned.  And  it  is  ordered,  the 
covenant  so  to  be  indorsed,  be  executed  by  the  said  Hercules 
Walker  (a). 


WILLIAM  C.  WILLIAMS,  SR.,  v.  WILLIAM  C.  WILLIAMS,  JR. 

[Decided  at  the  Summer  term,  1871,  of  the  Court  of  Appeals  of  Ken- 
tticky,  composed  of  WILLIAM  S.  PRYOR,  Chief  Justice,  and  BELVARD  J. 
PETERS,  WILLIAM  LINDSAY,  and  MORDECAI  R.  HARDIN,  Justices.  Re- 
ported in  8  Bush,  241.] 

A  trust  was  created  by  purchasing  land  at  execution  sales  upon  a  verbal  agreement  be- 
tween the  owner  and  the  purchaser  that  the  purchaser  would  hold  the  land  as 
security  for  the  money  advanced  and  interest,  and  that  the  owner  should 
have  the  right  to  redeem. 

Acquiring  and  holding  the  legal  title  to  land  by  purchasing  at  execution  sales 
and  otherwise,  under  a  verbal  agreement  between  the  owner  of  the  land  and 
the  purchaser  that  the  land  and  title  should  be  held  as  a  security  for  moneys 
advanced  and  interest  thereon,  and  that  the  owner  should  have  the  right  to 
redeem  the  land,  created  a  trust  which  is  enforced. 

In  this  case  the  purchaser  held  the  legal  title  to  the  land  about  fifteen  years  be- 
fore the  suit  was  brought,  in  which  the  trust  was  established  and  enforced 
against  him.  on  his  verbal  agreement  to  hold  the  land  and  permit  its  redemp- 
tion, etc.  See  opinion  for  a  full  statement  of  the  facts  and  evidence  estab- 
lishing the  trust. 

(a)  In  Prideaux  v.  Lonsdale,  4  Giffard's  Ch.  Rep.  159,  a  settlement  made  by  a 
woman  of  her  personal  property  after  her  engagement  to  be  married,  was  set 
aside  at  the  suit  of  the  husband,  although  he  was  told  before  the  marriage  that 
she  had  executed  a  settlement  aifecting  her  property.  It  appearing  that  neither 
she  herself  or  her  husband  was  accurately  informed  of  the  nature  and  effect  of 
the  trusts  of  the  settlement:  Held,  that  the  doctrine  of  constructive  notice  of  the 
contents  of  an  instrument  was  not  sufficient  to  bind  the  husband  on  the  ground 
of  acquiescence.  Suppression  of  the  truth,  or  misrepresentation  of  a  material 
fact,  will  vitiate  any  contract  or  gift,  the  validity  of  which  depends  upon  the 
truth  and  accuracy  of  the  representation  on  which  it  was  made. 


408  WILLIAMS  v.  WILLIAMS, 

Time  for  redeeming  land  sold  under  execution  being  extended  beyond  one  year 
by  the  purchaser,  he  is  entitled  to  ten  per  cent  interest  per  annum  for  one 
year  only.  In  such  case  interest  should  be  calculated  at  the  rate  of  ten  per 
cent  per  annum  for  one  year,  aud  after  adding  that  to  the  principal,  interest 
should  be  calculated  thereafter  at  the  rate  of  six  per  cent  per  annum. 

APPEAL  FROM  THE  LOUISVILLE   CHANCERY  COURT. 

Barret  &  Roberts,  James  Harlan,  and  Barr  &  Goodloe,  for 
appellant.  John  M.  Harlan  and  L.  A.  Wood,  for  appellee, 

CHIEF  JUSTICE  PRYOR  delivered  the  opinion  of  the  Court: 
W.  C.  Williams,  Jr.,  was  the  owner  by  devise  from  his  father, 
Daniel  Williams,  of  a  tract  of  thirty-three  and  one-third  acres 
of  land  adjacent  to  the  corporate  limits  of  the  cify  of  Louisville. 
On  the  loth  of  July,  1855,  this  land  was  sold  under  an  execu- 
tion from  the  Jefferson  Circuit  Court  in  favor  of  the  Louisville 
and  Shepherds ville  Plank-road  Company  against  the  said  Will- 
iams for  the  sum  of  $654.31,  and  purchased  by  Levi  Tyler  as 
the  agent  of  the  company. 

In  June,  1855,  an  execution  issued  upon  a  judgment  from  the 
same  court  in  favor  of  James  Brown  against  Williams  for  $309, 
and  this  execution  was  replevied  by  Williams,  with  the  appellant, 
W.  C.  Williams,  Sr.,  and  David  Meriwether,  as  his  sureties  on 
the  replevin-bond.  An  execution  afterward  issued  on  this  re- 
plevin-bond, and  on  the  4th  of  February,  1856,  the  appellee's 
equity  of  redemption  in  this  land  was  sold,  the  plaintiff,  Brown, 
becoming  the  purchaser  thereof  for  $361.48. 

On  the  loth  of  July,  1856,  Brown  assigned  to  Williams,  Sr., 
and  David  Meriwether,  the  benefit  of  his  purchase,  including  all 
his  title  and  interest  acquired  under  it.  Tyler,  who  had  made 
the  purchase  under  the  first  execution,  also  assigned  to  these 
same  parties,  Meriwether  and  Williams,  Sr.,  all  the  right,  title, 
and  interest  acquired  in  the  lands  by  reason  of  his  purchase. 
By  the  will  of  Daniel  Williams  the  devise  of  this  land,  or  the 
land  itself,  was  charged  with  the  payment  of  certain  sums  of 
money  devised  to  the  brothers  and  sisters  of  the  appellee.  White 
and  wife,  who  were  interested  in  this  lien  created  by  the  will, 
obtained  a  judgment  in  the  Louisville  Chancery  Court  against 
the  appellee,  enforcing  a  part  of  their  lien,  and  in  June,  1858, 
two  acres  of  this  tract  of  land  was  sold  to  satisfy  this  judgment, 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  409 

amounting  to ,  and  David  Meriwether  became  the  purchaser 

at  ,  and  gave  bond,  with  Williams,  Sr.,  his  surety. 

In  October,  1860,  Meriwether,  by  a  conveyance  without 
warranty,  sold  all  his  interest  in  this  land  to  the  appellant,  W. 
C.  Williams,  Sr.,  for  the  sum  of  $420. 

In  September,  1861,  White  and  wife  had  another  judgment 
to  enforce  their  lien,  yet  unpaid,  and  on  the  17th  of  March,  1862, 
there  was  a  sale  under  this  judgment,  and  W.  C.  Williams,  Sr., 
became  the  purchaser  for  the  sum  of  $1,254.94. 

After  the  assignment,  by  Brown  and  Tyler  to  Meriwether  and 
Williams,  Sr.,  of  the  executions  under  which  the  land  was  first 
sold,  the  deputy  sheriff,  on  the  17th  of  November,  1856,  made 
them  a  deed  for  this  land,  and  the  commissioner  in  a  few  days 
after  his  sale,  under  the  last  judgment  of  White  and  wife,  made 
to  Williams,  Sr.,  a  deed  to  this  land  also  by  reason  of  that  pur- 
chase; and  Meriwether  having  conveyed  to  him  the  interest  he 
had  acquired,  Williams,  Sr.,  thus  became  invested  with  the  legal 
title  to  the  whole  tract. 

The  appellee,  W.  C.  Williams,  Jr.,  on  the  4th  of  January, 
1870,  filed  this  suit  in  the  Louisville  Chancery  Court,  in  which 
he  alleges  that  the  transactions  between  Brown  and  Tyler  on  the 
one  side,  and  Meriwether  and  the  appellant  on  the  other,  result- 
ing in  the  transfer  to  them  of  these  executions  and  the  sales 
under  them,  were  all  for  his  benefit,  under  an  agreement  made 
to  that  effect ;  that  each  and  every  purchase  made  by  them  was 
under  a  like  agreement  and  trust,  with  the  right  of  the  appellee 
to  redeem  the  property,  and  that  the  appellant  held«it  merely  as 
security  for  the  repayment  of  moneys  advanced  by  him  ;  that 
the  deeds  were  made  by  the  sheriff  and  commissioner  to  this  land 
without  his  knowledge  or  consent ;  that  the  appellant  never  set 
up  any  claim  to  the  land  otherwise  than  as  stated,  until  August, 
1869,  at  which  time  he  claimed  the  property  absolutely,  and  is 
now  fraudulently  withholding  the  title.  He  also  claims  a  large 
sum  of  money  for  services  rendered  the  appellant  in  renting  out 
his  (appellant's)  property,  and  in  attending  to  his  business  gen- 
erally ;  that  the  value  of  these  services  amounts  to  a  sum  more 
than  sufficient  to  repay  the  appellant  all  the  moneys  advanced 
for  him. 

The  appellant  in  his  answer  denies  any  agreement  to  hold 


410  WILLIAMS   v.  WILLIAMS, 

this  property  in  trust  for  the  appellee,  and  insists  that  he  bought 
the  property  for  his  own  purposes,  and  that  all  the  purchases 
made  by  him  were  absolute  and  unconditional ;  that  he  regarded 
the  purchase  as  a  bargain,  and  it  was  always  his  intention  to 
give  the  plaintiff  a  part  of  it,  simply  as  a  gratuity,  and  that  he 
had  in  fact  directed  him  to  fence  off  twenty  acres  of  the  land. 
He  also  relies  upon  the  statute  of  frauds,  etc.  It  will  be  un- 
necessary to  recite  in  detail  the  mass  of  testimony  in  this  large 
record,  adduced  by  each  party  upon  the  questions  involved. 

It  seems  that  Williams,  Jr.,  about  the  time  his  property  was 
sold  under  the  execution  in  favor  of  Brown  and  Tyler,  had  been 
unfortunate  in  his  domestic  relations,  and  a  suit  was  then  pend- 
ing in  the  Louisville  Chancery  Court  against  him  by  his  wife 
for  a  divorce  and  alimony.  His  cousin,  Williams,  Sr.,  was  his 
friend  and  confidential  adviser  during  the  litigation  with  his  wife ; 
and  in  fact  seems  by,  his  advice  to  the  appellee  to  have  induced 
him  to  abandon  the  management  of  the  defense  and  intrust  it 
almost  altogether  to  the  appellant.  While  this  suit  was  pend- 
ing, and  shortly  after  the  sale  of  appellee's  land  under  the 
execution  of  Brown  and  Tyler,  the  appellant  had  an  interview 
by  previous  arrangement  with  the  appellee  at  the  law-office  of 
Rousseau,  in  Louisville,  for  the  purpose  of  devising  some  means 
to  relieve  the  appellee  from  his  pecuniary  embarrassments,  and 
to  aid  him  in  the  suit  then  pending  against  him  by  his  wife. 
This  interview  was  private,  and  not  in  the  presence  of  the  at- 
torney, and  all  he  knows  in  regard  to  it  is  that  when  it  termi- 
nated, and  the  parties  were  about  to  leave,  they  told  him  that 
the  arrangement  had  been  agreed  upon  between  them,  but  did 
not  state  its  terms.  This  meeting,  in  the  language  of  the  witness 
Rousseau,  was  to  assist  him,  either  "  by  advancing  him  money, 
or  in  aiding  him  to  obtain  it  from  others." 

Shortly  after  this  interview,  the  money  was  paid  by  Meri- 
wether  and  Williams,  Sr.,  to  the  purchasers  under  the  execu- 
tion, and  the  bids  transferred  to  them.  Meriwether  in  his 
deposition  in  the  divorce  case,  although  claiming  to  have  made 
an  absolute  purchase  of  the  land,  says,  in  speaking  of  that  pur- 
chase and  the  time  at  which  the  right  to  redeem  expired,  "  that 
the  fellow  was  about  losing  It  is  land,  and  the  transfers  were  made 
to  MS,"  meaning  himself  and  the  appellant. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  411 

In  1856,  when  the  first  sales  were  made  of  this  land  under 
execution,  it  was  worth  from  ten  to  fifteen  thousand  dollars, 
and  in  the  year  1860,  when  Meriwether  conveyed  his  interest 
in  the  land  to  the  appellant,  it  was  worth  fifteen  or  twenty 
thousand  dollai's.  The  interest  of  Meriwether  at  this  time  in 
the  land,  if  owned  by  him  as  alleged,  was  worth  not  less  than 
eight  thousand  dollars  ;  and  it  is  difficult  to  conceive  why  he 
would  thus  dispose  of  such  valuable  property,  adjacent  to  the 
growing  and  prosperous  city  of  Louisville,  increasing  in  value 
greatly  every  year,  to  the  appellant  for  the  nominal  consider- 
ation of  four  hundred  and  twenty  dollars.  The  appellant  was 
himself  wealthy,  and  had  no  claims  upon  the  generosity  of 
Meriwether. 

The  only  reasonable  solution  of  his  conduct  is  that  he,  to- 
gether with  the  appellant,  was  then  holding  the  property  as  the 
security  only  of  the  money  advanced  by  them  to  redeem  it. 
Meriwether  after  he  became  interested  in  the  executions,  and 
before  he  sold  to  W.  C.  Williams,  Sr.,  stated  to  his  son  "  that 
he  had  met  Williams,  Jr.,  who  told  him  that  the  time  for  re- 
deeming the  land  expired  on  that  day,  and  he  had  no  money  ; 
that  he  (Meriwether)  regarded  it  as  valuable  land,  and  that  it 
came  near  being  sacrificed  at  a  mere  song ;  that  himself  and  W. 
C.  Williams  stepped  forward  and  paid  it  off."  In  a  subsequent 
conversation  he  stated  u  that  he  (Meriwether)  was  hard  pressed 
for  money,  and  that  he  would  have  to  transfer  to  W.  C.  Williams 
his  interest  in  the  land,  and  Mrs.  Meriwether,  his  wife,  then 
asked  her  husband  if  Williams,  Jr.  (the  appellee),  had  been  pro- 
tected, and  he  replied  that  the  property  was  worth  some  fifteen 
or  twenty  thousand  dollars,  and  that  the  understanding  was  be- 
tween him  and  Williams,  Sr.,  that  whenever  the  appellee  would 
pay  off  the  debt  and  interest  he  might  have  the  property  back." 

In  addition  to  all  this,  both  Meriwether  and  the  appellant 
were  witnesses  in  the  divorce  suit  between  appellee  and  his 
wife  ;  they  knew  of  her  claim  for  alimony,  and  that  the  land  was 
being  valued  as  a  part  of  appellee's  estate.  They  had  purchased 
this  land  under  execution  levied  before  the  institution  of  the  suit, 
and  never  during  the  progress  of  that  tedious  litigation  asserted 
any  right  or  title  to  the  property;  but,  on  the  contrary,  their 
claims  were  reported  merely  as  moneys  advanced  for  the  appellee, 


412  WILLIAMS  v.  WILLIAMS, 

showing  his  entire  indebtedness  in  order  to  regulate  the  allow- 
ance for  alimony.  Both  Meriwether  and  Williams,  Sr.,  had  in- 
terested themselves  in  this  suit,  and  Williams,  Sr.,  no  doubt 
consulted  the  lawyers  of  his  cousin  (Williams,  Jr.)  oftener  than 
the  latter  himself  did  in  regard  to  it. 

These  facts,  connected  with  the  confidential  relations  existing 
between  these  parties,  and  the  great  inadequacy  of  price  paid  by 
them  for  this  land  they  claim  to  have  bought  unconditionally, 
forces  the  mind  to  the  conclusion  that  Meriwether  and  appellant 
were,  up  to  the  time  of  the  sale  by  Meriwether  to  the  appellant, 
holding  this  land  as  a  security  only  for  the  repayment  of  the 
moneys  advanced  by  them  for  the  appellee,  and  this  conclusion 
is  strengthened  by  the  acts  and  declarations  of  the  appellant  in 
regard  to  this  land  after  his  purchase  from  Meriwether.  After 
the  conveyance  by  Meriwether  to  appellant  of  Ms  interest,  we 
find  the  appellant  with  the  legal  title  to  this  land,  worth  from 
twenty  to  thirty  thousand  dollars,  at  a  cost  to  him  of  less  than 
three  thousand  dollars.  The  conveyances  made  of  this  land 
by  the  sheriff  and  commissioner  to  the  appellant  were  made,  so 
far  as  the  proof  shows,  without  the  knowledge  of  the  appellee ; 
but  that  in  a  short  time  afterward  he  knew  that  they  had  been 
thus  made,  is  clearly  established. 

In  July,  1860,  the  appellant  addressed  a  letter  to  the  appellee. 
He  says  that  his  mind  had  "  been  called  to  the  business  matters 
between  himself  and  appellee ;  that  his  object  in  aiding  him 
was  to  extricate  him  (appellee)  from  the  meshes  he  had  fallen 
into  by  reason  of  his  unfortunate  marriage,''  and  adds :  "  I  Avant 
you  to  be  a  free  man,  and  the  only  way  I  see  on  earth  is  for  you 
to  dispose  of  some  of  your  property ;  and  I  would  say  to  you, 
avoid  the  eating  moth  of  interest.  I  am  disposed  to  take  your 
lots  at  a  fair  cash  value,  in  order  that  we  may  bring  matters  to 
a  close.  As  I  consider  it  improvident  to  have  things  in  a  loose 
and  unsettled  state,  I  want  you  to  see  the  most  you  can  get  be- 
tween this  and  Saturday,  and  we  can  confer,"  etc. 

It  seems  the  appellee  had  made  a  division  of  this  land  into 
six  five-acre  lots,  and  had  employed  C.  Green,  an  auctioneer, 
to  sell  them  at  public  auction ;  the  property  was  advertised  by 
Green,  giving  the  locality  of  the  land  and  the  terms  of  sale. 
This  witness  says  that  after  he  had  advertised  the  lots  he  met 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  413 

the  appellant  in  Louisville,  and  spoke  to  him  of  the  intended 
sale,  and  the  appellant  then  remarked  that  he  (appellant)  would 
have  to  make  the  deeds  to  the  purchasers ;  that  he  was  holding 
the  property  for  appellee,  and  would  make  the  deeds  when  the 
sale  was  over.  This  was  in  the  year  1860.  The  price  offered 
for  these  lots  was  not  deemed  sufficient,  and  the  property  was 
withdrawn  from  the  market.  Here  was  a  plain  and  unmistakable 
recognition  of  the  appellant's  right  to  the  property  by  agreeing 
to  make  the  deeds  to  the  purchasers,  and  in  fact  by  letter  offer- 
ing to  buy  the  property  himself. 

In  1869,  the  appellee  again  employed  a  real  estate  agent  to 
sell  this  property,  and  this  agent  made  a  contract  with  a  man 
by  the  name  of  James,  by  which  he  agreed  to  take  twelve  acres 
of  the  land  at  two  thousand  two  hundred  and  fifty  dollars  per 
acre.  The  appellant  read  the  contract  between  the  parties, 
assented  to  the  sale,  and  agreed  to  make  the  deed.  This 
sale  was  not  perfected,  and  the  reason  was,  that  the  appellant 
refused  to  surrender  his  title  unless  he  was  paid  five  thousand 
dollars. 

The  declaration  was  made  time  and  again  by  the  appellant, 
from  the  years  1856  up  to  1869,  that  this  land  belonged  to  the 
appellee,  and  that  he  was  holding  it  for  him.  The  letters  of 
appellant  to  appellee,  while  in  Missouri,  and  before  Meriwether 
sold  his  interest,  all  tend  to  show  that  the  land  was  regarded  by 
appellant  as  appellee's  property.  It  is  true  that  the  appellant 
listed  the  property  for  taxation,  and  that  it  was  leased  by  himself 
and  Meriwether  for  several  years ;  still  in  all  this  leasing  the 
appellee  seems  to  have  had  some  connection  with  the  property ; 
he  was  the  only  person  ever  seen  or  known  upon  the  farm  by 
the  tenants,  repairing  and  looking  to  its  cultivation,  and  seemed 
to  be  so  much  interested  in  it  as  to  induce  one  of  the  tenants, 
Oldham,  to  ask  him  if  he  owned  it.  The  appellee  attested  one 
of  the  leases,  and  was  perhaps  called  on  as  a  witness  in  regard 
to  it,  but  was  not  examined.  In  the  preparation  of  the  plead- 
ings in  a  suit  against  one  of  the  tenants  for  waste  and  rents,  the 
appellant  directed  the  lawyer  to  advise  with  the  appellee,  in 
order  to  the  proper  understanding  of  the  case ;  and  although  he 
said  to  the  lawyer  that  it  was  the  old  man's  property,  still  we 
find  the  appellant  directing  the  officer  who  had  collected  the 


414  WILLIAMS  v.  WILLIAMS, 

rent  under  a  distress  warrant  to  pay  it  over  to  the  appellee,  as 
it  was  appellee's  land.  The  appellee,  during  the  whole  period 
between  the  years  1855  and  1869,  except  while  he  was  in  Mis- 
souri, seemed  to  be  always  present  when  leases  were  executed, 
and  invariably  attending  to  the  interests  and  repairs  on  the  land ; 
and  the  proof  of  appellant,  when  taken  in  connection  with  the 
proof  of  appellee,  rather  increases  than  lessens  the  force  of 
appellee's  testimony.  Why  it  was  the  title  was  held  in  the 
appellant  so  long,  is  a  question  not  easily  answered.  The  appel- 
lant may  have  supposed  that,  with  the  legal  title  to  the  property 
vested  in  him,  it  would  be  safe  from  the  improvident  manage- 
ment of  the  appellee.  It  is  certain,  however,  that  during  this 
whole  period  there  was  a  continued  recognition  by  appellant  of 
the  appellee's  right  to  the  property  (a). 

We  have  been  unable  to  perceive  how  the  wife  was  de- 
frauded by  this  mode  of  holding  the  title  to  the  land.  There 
was  no  effort  to  set  up  any  adverse  title  to  the  property  so  as 
to  defeat  the  wife's  claim  for  alimony  ;  but,  on  the  contrary,  it 
was  acknowledged  to  belong  to  the  appellee,  and  the  moneys 
that  had  been  advanced  for  him  listed  in  that  suit  as  a  part  of 
his  indebtedness. 

There  are  many  facts  in  the  record  that  do  not  speak  well 
for  the  appellee ;  but  no  such  state  of  case  is  presented  as 
would  authorize  this  Court  to  divest  him  of  this  valuable  estate 
upon  a  consideration  so  grossly  inadequate,  and  having  its  in- 
ception from  his  unfortunate  troubles  and  pressing  necessities 
for  money. 

The  counsel  for  appellant,  in  a  very  able  and  elaborate 
brief,  insists  that  although  the  facts  proven  by  appellant  may 
be  regarded  as  uncontroverted,  still  the  statute  of  frauds  pre- 
cludes his  right  of  recovery,  as  the  alleged  agreement  is  not  in 
writing  (b).  The  facts  show  that  this  was  not  a  sale  of  any 
lands  to  the  appellee  by  appellant,  but  a  mere  holding  of  the 
legal  title  obtained  upon  a  promise  made  to  extend  the  time  for 

(a)  See  Wedderlurn  v.  Wedderlurn,  preceding,  page  348,  as  to  the  time  within 
which  accounts  may  be  taken  between  trustee  and  cestui  que  Inut. 

(6)  The  references  are  to  the  Revised  Statutes  of  Kentucky,  1  Stanton,  484, 
485 ;  2  Ib.  230. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  415 

redeeming  the  plaintiff's  property,  and  as  a  security  for  the 
moneys  they  had  advanced  for  him. 

In  the  case  of  Griffin  and  wife  v.  Coffey,  9  B.  Monroe,  452, 
the  dower  interest  of  Griffin's  wife  in  a  house  and  lot  was  sold 
under  execution  by  the  sheriff,  and  purchased  by  Gann.  The 
sheriff  conveyed  the  property  to  Gann ;  but,  being  subject  under 
the  law  to  redemption,  Gann  sold  and  conveyed  it  to  Coffey. 
Griffin  and  wife  filed  their  bill  in  this  case  alleging  that  Coffey 
redeemed  the  property  for  them,  and  took  a  conveyance  at  their 
request,  and  was  to  hold  the  land  for  indemnity.  Coffey  denied 
the  trust,  and  claimed  the  property  as  his  own.  The  allegations 
of  Griffin  and  wife  were  sustained  by  the  proof,  and  the  court 
held  in  this  case  "that  it  was  not  a  purchase  by  Coffey  from 
Gann,  the  legal  title-holder,  but  it  was  a  pledge  by  Griffin  and 
wife  to  Coffey  of  their  equity  of  redemption  until  Coffey  was 
repaid,  and  a  mere  extension  of  the  time  for  redemption,  which 
could  be  done  by  the  verbal  agreement  of  the  parties." 

In  the  case  of  Martin  v.  Martin,  16  B.  Monroe,  8,  the  com- 
missioner of  the  Anderson  Circuit  Court  sold  a  tract  of  land 
belonging  to  Josiah  Martin  to  satisfy  a  judgment  in  behalf  of 
Lancaster  and  others.  Draffin  bought  the  land  for  Josiah  Mar- 
tin, as  he  informed  him  after  the  sale,  to  prevent  a  sacrifice  of 
his  property.  Draffin  afterward  transferred  the  benefit  of  his 
purchase  to  E.  Martin,  with  the  agreement  that  he  was  to  take 
Draffin's  place  in  the  purchase,  pay  the  money  bid  by  him  for 
the  land,  and  when  his  brother  paid  him  he  was  to  have  the  land 
back.  After  this  transfer  by  Draffin,  E.  Martin  procured  an 
order  for  a  conveyance  of  the  land  to  himself.  Josiah  Martin, 
upon  this  state  of  case,  brought  his  suit  to  cancel  the  deed  and 
have  the  possession  of  the  land  surrendered  to  him.  It  Avas  held 
"that,  although  the  agreement  was  in  parol,  it  was  a  trust  that 
the  purchaser  could  not  refuse  to  perform,"  and  relief  was  granted. 

In  the  case  of  Miller's  heirs  v.  Antk,  2  Bush,  408,  Miller 
purchased  under  a  decretal  sale,  at  much  less  than  its  value, 
Antle's  land,  containing  two  hundred  and  seventeen  acres.  By 
an  agreement  in  parol  between  Miller  and  Antle  before  the  pur- 
chase, Antle  was  to  have  one  hundred  and  seventeen  acres  of 
this  land  on  payments.  Miller,  after  his  purchase,  lived  on  the 
one  hundred  acres,  and  Antle  retained  his  one  hundred  and 


416  WILLIAMS  v.  WILLIAMS, 

seventeen  acres.  Miller  died,  having  received  before  his  death 
fourteen  hundred  dollars  of  the  money  from  Antle.  Miller  had 
also  obtained  a  deed  from  the  commissioner  for  the  whole  land. 
In  this  case,  upon  a  petition  filed  by  Antle,  it  was  adjudged 
that  he  was  entitled  to  the  land. 

In  the  case  of  Green  v.  Ball,  4  Bush,  58G,  Mitchell  pur- 
chased the  land  at  a  sale  by  the  commissioner,  and  agreed 
verbally  with  Green,  the  owner,  that  he  would  become  the  pur- 
chaser to  prevent  a  sacrifice,  and  that  all  legal  and  equitable 
rights  that  he  might  then  acquire  should  operate  only  as  u 
mortgage  to  secure  him  in  the  repayment  of  the  moneys  ad- 
vanced. Mitchell  afterward  obtained  a  conveyance  of  the  land, 
and  sold  and  conveyed  it  to  Ball,  who  had  notice  of  the  parol 
agreement  between  Mitchell  and  Green.  The  court  held  that 
such  a  parol  contract  was  not  within  the  statute  ^of  frauds,  and 
granted  the  owner  relief  as  against  the  last  purchaser. 

The  numerous  authorities  referred  to  by  counsel  for  the 
appellant  are  not  in  conflict  with  the  authorities  already  referred 
to.  In  our  opinion,  this  was  a  trust  that  might  have  been  en- 
forced as  against  either  Meriwether  or  the  appellant,  and  that 
they  obtained  the  deeds  and  held  the  property  merely  to  secure 
them  in  the  moneys  they  had  advanced  for  the  appellee,  and  that 
such  was  the  understanding  and  agreement  of  all  the  parties. 

In  the  case  of  Thomas  v.  M'Cormiclt,  9  Dana,  108,  the  court 
says  that  there  can  be  no  doubt  that  M'Cormick  understood  and 
intended  that  the  conveyance  should  be  absolute  on  its  face,  and 
then  decides  that  parol  testimony  can  not  be  admitted  in  oppo- 
sition to  the  legal  import  of  the  deed  unless  upon  an  allegation 
of  fraud  or  mistake  or  vice  in  the  consideration. 

We  can  not  perceive  how  that  principle  is  to  be  made  appli- 
cable to  the  present  case.  Here  no  «ale  was  made  as  between 
the  parties,  but  a  mere  holding  by  the  appellant  by  reason  of 
the  transfer  of  the  executions  under  which  the  land  had  been 
sold,  to  enable  the  appellee  to  redeem  it,  and  to  secure  the  appel- 
lant in  the  moneys  he  had  advanced  for  him.  It  might  well  be 
argued  that  the  manner  in  which  the  deeds  were  procured  by 
appellant  was  a  fraud  upon  the  appellee  ;  their  execution,  how- 
ever, to  appellant  can  not  affect  the  rights  of  the  appellee  under 
the  facts  of  this  case. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  417 

The  judgment  of  the  court  below,  permitting  the  appellee  to 
redeem  the  land,  was  proper,  and  is  now  affirmed.  The  com- 
missioner's report,  however,  is  defective,  and  the  exceptions  filed 
by  appellant  as  to  the  claim  of  appellee  for  services  should  have 
been  sustained.  There  is  no  reason  why  the  statute  of  limita- 
tions is  not  a  bar  to  appellee's  claim  for  services.  There  was 
no  trust  created  in  any  way  by  the  employment  of  appellee  to 
rent  appellant's  lands.  It  is  like  any  other  claim  for  work  and 
labor  or  services  performed,  and  his  claim,  existing  for  a  longer 
period  than  five  years  previous  to  this  suit,  should  have  been 
rejected.  The  testimony  of  the  witness,  Corcoran,  in  regard  to 
the  acknowledgment  of  the  claim  of  appellee  for  services  by 
appellant,  is  not  deemed  sufficient  to  take  the  case  out  of  the 
statute.  His  whole  testimony  impresses  the  mind  with  the  belief 
that  he  is  very  favorable,  to  say  the  least  of  it,  to  appellee  in 
this  controversy,  and  his  statements  as  to  this  acknowledgment 
is  inconsistent  with  other  facts  in  this  record  bearing  upon  the 
same  point.  The  appellant,  according  to  this  statement  of  Cor- 
coran, is  presented  with  this  large  account,  amounting  to  five 
thousand  five  hundred  dollars  for  eleven  years'  services,  and 
with  scarcely  time  to  look  at  it  pronounces  it  all  right.  This 
account  charges  five  hundred  dollars  per  year  for  the  services, 
when  the  proof  shows  that  he  was  only  to  have  ten  per  cent  on  the 
amount  collected ;  and,  in  addition  to  all  this,  it  is  not  to  be  pre- 
sumed that  he  would  collect  this  money  during  a  period  of  eleven 
years,  in  pressing  need  of  money  himself,  and  never  retain  one 
dollar  for  his  services.  Three  hundred  dollars  per  annum  is  as 
much  as  the  appellee  is  entitled  to  for  his  services  for  the  five 
years  next  preceding  the  institution  of  this  suit. 

The  commissioner  erred  in  allowing  the  appellant  ten  per 
cent  interest  on  the  amount  of  the  executions  under  which  this 
property  was  sold  for  a  longer  period  than  one  year.  He  should 
calculate  interest  for  one  year  at  ten  per  cent,  and  after  adding 
principal  and  interest  together  calculate  interest  upon  the  result 
at  six  per  cent. 

The  commissioner's  report  should  be  made  to  conform  to 
this  opinion  ;  and  for  the  balance  due  appellant,  if  not  paid, 
the  land  or  a  sufficiency  thereof  should  be  sold.  Upon  the 

27 


ROACH  v.  HUDSON, 


payment    of  the   money,   the   appellant    should   be   required   to 
convey  to  appellee  the  land. 

The  judgment  is  reversed  on  the  original  appeal,  so  far  as  it 
is  adjudged  that  appellee  shall  recover  of  the  appellant  $404.52 
with  interest,  and  affirmed  on  cross-appeal.  The  cause  is  re- 
manded for  further  proceedings  in 'conformity  with  this  opinion. 


ROACH  v.  HUDSON. 

[Decided  at  the  Summer  term,  1871,  of  the  Court  of  Appeals  of  Ken- 
tucky, Judge  M.  R.  HARDIN  delivering  the  opinion.  Reported  in  8  Busli,  410.] 

Purchaser  at  decretal  sale  induced  persons  not  to  bid  against  him  by  giving  as- 
surance that  on  the  return  of  the  absent  owner,  he  would  let  him  repurchase 
the  property  at  the  inadequate  price  given  by  the  purchaser.  Held,  that  if 
the  absent  owner,  on  returning  home,  had  sought  or  required,  within  a  reason- 
able time,  a  resale  of  the  property  to  him  in  compliance  with  the  assurance 
given  at  the  sale  by  the  purchaser,  and  the  latter  had  refused  compliance, 
the  Court  would  regard  him  as  having  held  the  property  in  trust,  and  liable 
to  account  for  the  difference  between  the  price  paid  and  the  amount  for 
which  he  afterward  sold  the  property. 

But  m  this  case  the  purchaser  was  absolved  from  the  trust.  It  was  made  to  appear 
that  after  the  original  ownei-'s  return,  the  purchaser,  in  good  faith,  offered  to 
let  him  repurchase  the  property  by  paying  only  what  it  had  cost,  including 
improvements,  and  not  objecting  to  the  proposition  as  unfair,  or  variant  from 
the  assurance  given  when  the  purchase  was  made,  the  original  owner  declined 
the  privilege  of  repurchasing:  Held,  that  by  thus  declining  to  repurchase, 
the  original  owner  absolved  the  purchaser  from  any  trust  or  liability  which 
devolved  on  him  by  his  promise  or  assurance  made  at  the  sale,  and  waived 
his  right  thereafter  to  demand  a  compliance  therewith,  and  left  the  purchaser 
free  to  keep  or  dispose  of  the  property  as  his  own  without  responsibility  to 
the  original  owner. 

APPEAL  FROM  GREEN  CIRCUIT  COURT. 

John  W.  Lewis,  Garnett  &  Baker,  and  John  Rodman,  for 
appellant.  A.  J.  James  and  Daniel  James,  for  appellee. 

JUDGE  HARDIN  delivered  the  opinion  of  the  Court :  Under 
a  judgment  of  the  Green  Circuit  Court  in  favor  of  W.  B.  Pat- 
rick against  the  appellee,  Drury  Hudson,  a  house  and  some  lots 
of  the  latter  in  the  town  of  Greensburg  were  sold  by  a  commis- 
sioner on  the  21st  day  of  July,  18G2,  and  purchased  by  the 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  419 

appellant,  J.  J.  Roach,  at  the  price  of  $704,  Hudson  being  at 
the  time  absent  from  this  state,  and  within  the  military  lines  of 
the  Confederate  States. 

It  appears  that  at  the  sale  the  appellant  induced  at  least  one 
friend  of  Hudson  to  cease  to  bid  against  him,  by  giving  an  as- 
surance that  on  the  return  of  Hudson  to  Kentucky,  he  would  let 
him  repurchase  the  property  at  the  price  given  by  the  appellant ; 
but  whether  he  waived  the  right  to  improve  the  property,  and 
required  pay  for  improvements  also  in  the  event  of  a  resale, 
there  is  a  contrariety  of  evidence.  The  evidence  is  also  con- 
flicting as  to  the  real  value  of  the  property  at  the  time,  but  the 
conclusion  is  authorized  that  the  price  given  was  to  some  extent 
inadequate ;  and  but  for  the  assurance  given  by  the  appel- 
lant as  aforesaid,  a  relative  of  the  appellee  would  have  bid  the 
property  up  even  to  fifteen  hundred  dollars,  or  purchased  it  for 
his  benefit. 

It  also  appears  that,  after  improving  the  property  to  the 
amount  of  $350,  the  appellant,  on  the  20th  day  of  November, 
1866,  sold  it  to  Dodd  for  $1,825. 

This  suit  was  prosecuted  by  the  appellee  to  recover  of  the 
appellant  the  difference  between  the  cost  of  the  property  and 
improvements  and  the  price  at  which  he  sold  it ;  and  the  Cir- 
cuit Court  having  rendered  a  judgment  for  the  plaintiff  on  that 
basis,  the  defendant  has  appealed  to  this  Court. 

If  the  appellee,  on  returning  to  his  home,  had  sought  or  re- 
quired, within  a  reasonable  time,  a  resale  of  the  property  to  him, 
in  compliance  with  the  assurance  given  by  the  appellant  at  the 
sale,  and  the  latter  had  refused  compliance,  we  would  regard 
him  as  having  held  the  property  in  trust  for  the  appellee,  and 
concur  in  the  conclusion  of  the  Circuit  Court  that  he  should  ac- 
count for  the  excess  of  the  price  he  received  over  the  cost  of 
the  property  to  him. 

But  it  satisfactorily  appears  from  the  testimony  of  the  wit- 
nesses, White,  Mrs.  Durham,  and  Mrs.  Mason,  uncontradicted 
and  unimpeached,  that  the  appellant,  after  the  appellee's  return 
to  Kentucky  in  1865,  offered  in  good  faith  to  let  him  repurchase 
the  property  by  paying  only  what  it  had  cost  the  appellant, 
including  improvements,  and  that  the  appellee,  not  objecting  to 
the  proposition  as  unfair  or  variant  from  the  assurance  given  by 


-  420— *f3<0  HONORE  v.   HUTCHINGS, 

the  appellant  when  he  purchased  the  property,  declined  to  avail 
himself  of  the  privilege  of  repurchasing. 

This,  in  our  opinion,  absolved  the  appellant  from  any  trust 
or  liability  devolved  on  him  by  his  promise  or  assurance  made 
at  the  sale  as  aforesaid,  and  waived  the  right  of  the  appellee  to 
demand  a  compliance  therewith,  and  left  the  appellant  free  to 
keep  or  dispose  of  the  property  as  his  own,  without  responsi- 
bility to  the  appellee. 

Wherefore  the  judgment  is  reversed,  and  the  cause  remanded 
with  directions  to  dismiss  the  petition  (a). 


HONORE  v.  HUTCHINGS. 

[Decided  at  the  Winter  term,  1871,  of  the  Court  of  Appeals,  in  Ken- 
tucky, Judge  WM.  LINDSAY  delivering  the  opinion  of  the  Court.  Reported 
in  8  Bush,  687.] 

A  resulting  trust  and  pledge  or  mortgage  not  a  conditional  sale. — Kutchingsand  Honore, 
in  1861,  jointly  purchased  thirty  acres  of  land  near  Chicago,  111.  Hutchings 
advanced  the  entire  purchase-price,  took  a  conveyance  to  himself,  and  exe- 
cuted a  writing  in  which,  among  other  things,  i:it  is  agreed  between  said 
parties  that  when  said  land  is  sold,  said  Hutchings  is  to  have  first  his  six 
thousand  dollars  so  advanced,  and  ten  per  cent  interest,  and  the  profits  over 
and  above  said  sum  are  to  be  equally  divided  between  said  parties.  .  . 
This  arrangement  is  to  continue  eighteen  mouths,  when,  if  the  property  has 
not  been  sold,  said  Honore  is  to  pay  one-half  the  sum  so  advanced,  with  the 
accrued  interest,  or  said  Hutchings  is  to  be  the  sole  owner  of  the  same."  The 
land  was  not  sold  within  the  eighteen  months,  and  Honore  failed  to  pay  any 
part  of  the  sum  so  advanced.  In  1869,  Hutchings  sold  the  land  for  one  hun- 
dred thousand  dollars,  and  refused  to  pay  any  part  thereof  to  Honore.  Honore 
sued  Hutchings  for  one-half  of  the  net  profits,  after  deducting  purchase-price, 
interest,  etc.:  Held,  that  a  trust  resulted  in  favor  of  Honore  to  the  extent  of 
one-half  of  the  land  jointly  purchased.  This  interest  he  pledged  to  Hutch- 
ings to  secure  the  repayment  to  him  of  one-half  the  purchase-price  ad- 
vanced, etc.;  and  Hutchings  held  the  legal  title  to  one-half  of  the  land  in 
trust  for  Honore,  and  the  latter  is  entitled  to  one -half  of  the  net  profits 
realized  upon  the  resale  of  the  same. 

(a)  See  the  preceding  cases  of  Follansbe  v.  Kilbreth,  page  180,  and  Wade  T. 
Pettibone,  page  190,  to  the  same  point.  Also,  Hoffman  Coal  Co.  v.  Cumberland  Coal 
Co.,  page  87,  and  notes  on  pp.  88,  72,  98. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  421 

The  conveyance  to  Hutcliings  and  the  condition  of  defeasance  executed  by  him 
to  Honore  must  be  construed  together,  as  though  the  one  was  incorporated 
into  the  other.  (Powell  on  Mortgages,  67.) 

When  so  construed,  it  appears  that  the  one  took  an  absolute  title  to  the  joint 
property  of  both,  having  first  executed  and  delivered  to  the  other  a  condition 
of  defeasance.  In  such  a  case  the  onus  devolves  on  the  party  who  insists 
that  the  contract  was  a  conditional  sale.  (Edrington  v.  Harper,  3  J.  J.  Mar- 
shall, 356.) 

The  contracts  show  upon  their  face  that  Hatchings  took  the  title  to  secure  the 
payment  of  the  money  and  the  interest  that  might  accrue  upon  the  same. 
Such  an  arrangement  is  perfectly  consistent  with  the  idea  of  a  mortgage, 
and  though  it  may  be  doubted  as  to  whether  or  not  the  absolute  conveyance 
to  Hutchings  was  intended  to  operate  only  as  such,  yet  the  rule  is  that  in  all 
doubtful  cases  the  law  will  construe  a  contract  to  be  a  mortgage,  because 
such  a  construction  will  be  most  apt  to  attain  the  ends  of  justice  and  pre- 
vent, fraud  and  oppression.  (Skinner  v.  Miller,  5  Littell,  86.) 

Distinction  between  a  mortgage  and  a  conditional  sale. — Where  the  debt  forming  the 
consideration  of  the  conveyance  still  subsists,  or  the  money  is  advanced  by 
way  of  loan,  with  a  personal  liability  on  the  part  of  the  borrower  to  repay 
it,  and  by  the  terms  of  the  agreement  the  land  is  to  be  reconveyed  on  pay- 
ment of  the  money,  it  will  be  regarded  as  a  mortgage;  but  where  the  rela- 
tion of  debtor  and  creditor  is  extinguished  or  never  existed,  there  a  similar 
agreement  will  be  considered  as  merely  a  conditional  sale.  (2  Greenleaf  s 
Cruise,  note  1,  page  74.) 

The  common  law  will  be  presumed  to  be  in  force  in  the  state  of  Illinois,  where  the  en- 
tire transaction  in  this  case  took  place,  as  there  is  nothing  in  the  record 
showing  the  contrary. 

APPEAL  FROM  THE  LOUISVILLE  CHANCERY  COURT. 

Barret  &  Roberts  and  W.  P.  D.  Bush,  for  appellant.  E. 
Harris,  E.  S.  Worthington,  I.  &  J.  Caldwell,  and  J.  F.  &  T.  W. 
Bullitt,  for  appellee. 

JUDGE  LINDSAY  delivered  the  opinion  of  the  Court:  H.  H. 
Honore,  who  was  a  real  estate  agent  in  the  city  of  Chicago,  Illi- 
nois, and  Eusebius  Hutchings,  a  citizen  of  Louisville,  Kentucky, 
having  negotiated  with  one  Tiernan  for  the  purchase  of  an  un- 
divided moiety  of  a  tract  of  sixty  acres  of  land  situated  near  the 
city  of  Chicago,  agreed  that  the  title  to  the  same  should  be  con- 
veyed to  Hutchings  for  the  reasons  and  purposes  set  out  in  a 
paper  executed  and  delivered  by  Hutchings  to  Honore  on  the 
18th  day  of  November,  1861.  Said  paper  is  in  the  following 
words : 

"Mr.  E.  Hutchings  has  this  18th  day  of  November,  1861,  bought  jointly  with 
H.  H.  Houore  the  undivided  half  of  sixty  acres  of  land  in  section  13,  township  39, 


422  HONORE  v.  HUTCHINGS, 

range  13,  from  Mr.  Tiernan,  for  the  sum  of  six  thousand  dollars,  the  whole  of 
which  sum  the  said  Hutchings  is  to  pay,  and  takes  the  title  and  control  of  the 
property  to  secure  himself  for  said  sum  of  six  thousand  dollars  and  ten  per  cent  interest 
that  may  accrue  upon  the  same  until  the  land  is  sold. 

"  It  is  agreed  between  said  parties  that  when  said  land  is  sold,  said  Hutchings 
is  to  have  first  his  six  thousand  dollars  so  advanced,  and  ten  per  cent  interest,  and  the 
profits  over  and  above  said  sum  are  to  be  divided  equally  between  said  parties. 
The  parties  are  to  pay  equally  the  taxes  or  any  assessments  that  may  be  levied 
upon  said  land,  and  the  parties  propose  to  sell  said  land  when  a  satisfactory  price 
to  said  Hutchings  can  be  obtained.  This  arrangement  is  to  be  continued  eighteen 
months,  when,  if  the  property  has  not  been  sold,  said  Honore  f*  to  pay  one-half 
the  turn  to  advanced,  with  the  accrued  interest,  or  said  Hutchings  is  to  be  the  sole 
owner  of  the  same.  [Signed,]  E.  HUTCHINGS.'' 

The  evidence  in  the  case  conduces  to  show  that  the  land  was 
bought  upon  very  favorable  terms,  and  that  the  parties  making 
the  purchase  had  every  reason  to  believe  that  a  great  speculation 
had  been  secured.  It  can  not  be  doubted  but  that  it  was  through 
the  exertions  and  superior  information  of  Honore  that  the  invest- 
ment, which  eventually  turned  out  even  more  profitable  than 
could  reasonably  have  been  expected  by  either  party,  was  made. 
During  the  first  two  or  three  years  after  the  purchase,  lands  in 
the  vicinity  of  Chicago  did  not  advance  in  value  as  rapidly  as 
had  been  anticipated,  and  no  sale  was  made  within  the  stipu- 
lated time.  Honore,  who  appears  to  have  been  greatly  embar- 
rassed, failed  to  pay  one-half  of  the  purchase-price  and  the 
accrued  interest  thereon,  as  he  had  agreed  to  do.  and  Hutchings 
insists  that  by  reason  of  such  failure  he  forfeited  the  interest 
secured  to  him  in  the  purchase  by  the  writing  before  set  out ; 
and  when  Honore  applied  to  him,  some  time  after  the  expiration 
of  the  eighteen  months,  for  an  extension  of  time  within  which 
to  make  the  agreed  payment,  he  declined  to  accede  to  the  pro- 
posal, and  claimed  that  he  was  then  the  sole  owner  of  the  land. 

In  pursuance  to  the  written  agreement,  Hutchings,  on  the 
31st  day  of  December,  1861,  caused  the  land  to  be  conveyed  to 
himself.  In  February,  1869,  he  sold  it  for  one  hundred  thousand 
dollars  in  currency. 

Honore  instituted  this  suit  against  him,  claiming  that  under 
the  terms  of  their  purchase  he  was  a  joint  owner  with  him  in  the 
land  purchased,  and  entitled  to  one-half  of  the  net  profits  real- 
ized in  the  speculation.  His  petition  was  dismissed,  and  he  has 
appealed  to  this  Court. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  423 

The  legal  title  to  the  land  having  been  conveyed  to  Hutch- 
ings,  the  first  question  to  be  determined  is,  whether  or  not  the 
written  agreement  executed  by  him  to  Honore  so  far  modified 
the  legal  effect  of  this  conveyance,  made  with  the  knowledge 
and  consent  of  the  latter,  as  to  raise  by  implication  of  law  a 
trust  in  his  favor  to  the  extent  of  one-half  of  the  land.  The  en- 
tire transaction  took  place  in  the  state  of  Illinois,  and  as  there  is 
nothing  in  the  record  showing  the  contrary,  we  must  presume 
that  the  common  law  is  in  force  in  that  state. 

By  the  common  law,  implied  trusts  are  generally  raised  upon 
the  supposed  intention  of  the  parties,  as  gathered  from  their  lan- 
guage and  conduct,  or  from  the  nature  of  the  transaction  between 
them.  If  the  conveyance  be  made  to  one  person  and  the  pur- 
chase-money paid  by  another,  a  trust  results  by  implication  of 
law  in  favor  of  the  person  who  pays  the  money.  So  likewise,  if 
the  conveyance  be  made  to  one  and  the  purchase-price  paid  in 
part  by  another,  a  resulting  trust  is  raised  in  favor  of  the  latter  to 
the  extent  of  such  payment.  In  this  instance,  however,  it  is 
insisted  that  no  part  of  the  purchase-money  was  paid  by  the 
appellant,  and  that  he  does  not  come  within  the  reason  of  either 
of  the  foregoing  equitable  rules.  But  it  is  equally  well  estab- 
lished that  if  a  joint  purchase  be  made  in  the  name  of  one  party, 
and  the  other  secures  to  be  paid  his  share  of  the  purchase-price, 
he  will  be  entitled  to  his  proportion  of  the  property  purchased 
as  a  resulting  trust,  Wray  v.  Steele,  2  Ves.  &  Bea.  388  ;  Tiffany 
and  Bullard  on  Trusts  and  Trustees,  97. 

In  the  case  of  Boyd  v.  M'Clain,  1  Johns.  Ch.  582,  Chancel- 
lor KENT  goes  even  further  than  this.  In  that  case,  the  party  to 
whom  the  conveyance  was  made  paid  the  entire  purchase-price, 
yet  the  chancellor  permitted  the  fact  to  be  established  by  oral 
testimony  that  he  took  the  title  to  secure  the  repayment  of  the 
same,  it  having  been  loaned  to  the  real  purchaser,  and  held  that 
a  trust  resulted  in  favor  of  the  latter  by  implication  of  law.  In 
this  case  we  have  written  evidence  that  Hutchings  bought  the 
land  jointly  with  Honore ;  that  Honore  secured  to  le  paid  his 
share  of  the  six  thousand  dollars,  the  purchase-price,  and  ten 
per  cent  interest  thereon,  which  sum  had  been  advanced  by 
Hutchings  on  the  joint  purchase  of  himself  and  Honore ;  that 
the  parties  were  to  share  equally  the  profits  realized  on  the 


424  HONORE   v.   HUTCHINGS, 

resale  of  the  land,  and  to  bear  equally  the  taxes  and  assessments 
that  might  be  levied  against  the  same,  and  that  when  sold  it  was 
to  be  sold  by  "  the  parties,"  are  circumstances  which  of  them- 
selves are  sufficient  to  establish  the  joint  ownership  of  the  liti- 
gants, even  if  Hatchings  had  not  over  his  own  signature  stated 
that  such  was  the  fact. 

It  therefore  becomes  necessary  to  determine  the  legal  effect 
of  the  condition  of  forfeiture  contained  in  the  writing  upon  which 
Honore  relies  to  support  his  claim  to  one-half  of  the  net  profits 
realized  from  the  speculation.  It  was  agreed  that  in  case  the 
land  was  not  sold  at  the  end  of  eighteen  months,  he  was  to  pay 
one-half  of  the  sum  advanced,  witli  the  accrued  interest,  or 
Hutchings  was  to  be  the  sole  owner  of  the  land. 

If  it  can  be  gathered  from  this  that  Honore  took  no  vested 
interest  in  the  land  under  the  purchase  from  Tiewian,  but  was 
merely  the  agent  of  Hutchings  to  sell,  and  was  to  receive  one- 
half  of  the  net  profits  as  compensation  for  his  services  in  making 
the  sale,  then  it  follows  that  the  contract  between  the  parties 
was  in  the  nature  of  a  conditional  sale  from  Hutchings  to  Hon- 
ore, and  as  time  is  of  the  essence  of  such  contracts,  the  failure 
of  Honore  to  make  prompt  payment  of  the  stipulated  amount 
puts  it  out  of  the  power  of  a  court  of  equity  to  afford  him  relief. 
But  to  give  such  a  construction  to  this  latter  clause  not  only 
makes  it  repugnant  to  the  remainder  of  the  agreement,  but 
makes  it  override  and  nullify  every  other  stipulation  or  provision 
contained  in  the  entire  writing. 

As  we  have  before  stated,  a  trust  resulted  in  favor  of  Honore 
to  the  extent  of  one-half  of  the  land  jointly  purchased.  This 
interest  he  pledged  to  Hutchings  to  secure  the  repayment  to  him 
of  one-half  of  the  purchase-price  advanced.  In'  pursuance  to 
their  agreement  Hutchings  took  the  title  to  the  land,  and  was 
allowed  to  control  the  same.  But  the  conveyance  of  Tiernan, 
and  the  writing  executed  by  Hutchings,  constitute  in  law  but  one 
instrument,  and  must  be  construed  together  as  though  the  one 
was  incorporated  into  the  other,  Powell  on  Mortgages,  67. 
When  so  construed,  it  appears  that  the  one  took  an  absolute 
title  to  the  joint  property  of  both,  having  first  executed  and 
delivered  to  the  other  a  condition  of  defeasance.  In  such  a 
case  the  onus  devolves  on  the  party  who  insists  that  the  con- 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  425 

tract  was  a  conditional  sale,  Edrington  v.  Harper,  3  J.  J.  Mar- 
shall, 356. 

The  contracts  show  upon  their  face  that  Hutchings  took  the 
title  to  secure  the  payment  of  the  money  and  the  interest  that 
might  accrue  upon  the  same.  Such  an  arrangement  is  perfectly 
consistent  with  the  idea  of  a  mortgage,  and  though  we  may 
doubt  as  to  whether  or  not  the  absolute  conveyance  to  Hutch- 
ings  was  intended  to  operate  only  as  such,  yat  the  rule  is  that 
"  in  all  doubtful  cases  the  law  will  construe  a  contract  to  be  a 
mortgage,  because  such  a  construction  will  be  most  apt  to  attain 
the  ends  of  justice  and  prevent  fraud  and  oppression,"  Skinner 
v.  Miller,  5  Littell,  86  (a). 

We  do  not  regard  it  as  material  that  Honore  was  insolvent, 
and  that  Hutchings  took  no  other  security  for  his  money  than 
the  land  itself;  nor  that,  under  our  construction  of  the  contract, 
in  case  the  property  decreased  in  value,  it  was  optional  with 

(a)  DEED  OF  TRUST,  AND  THE  SAME  IN  THE  NATURE  OF  A  MORTGAGE. — "There 
is  a  well  settled  distinction  between  an  absolute  deed  of  trust,  and  a  deed  of  trust 
in  the  nature  of  a  mortgage.  The  one  is  conditional  and  defeasible,  the  other  is 
unconditional  and  indefeasible  for  the  purposes  of  the  trust,  Hoffman  v.  Macall,  5 
Ohio  State,  125. 

WHERE  A  DEED  ABSOLUTE  WILL  BE  HELD  TO  BE  A  MORTGAGE. — In  Irwin  v. 
Longworth,  20  Ohio  R.,  581,  it  was  held:  "Where  a  conveyance  of  real  estate  is 
made  to  a  trustee  to  indemnify  the  surety  of  the  grantor,  and  the  surety,  after 
paying  the  debt,  takes  a  conveyance  from  the  trustee  in  satisfaction  of  the  debt, 
under  an  order  from  the  heirs  of  the  grantor,  made  'for  the  safety  of  the  trustee,' 
and  under  an  impression  that  they  'have  no  interest  in  the  premises,'  the  equita- 
ble interests  of  the  heirs  are  not  thereby  prejudiced.  If  the  trustee  in  such  a 
case,  convey  to  the  surety  in  satisfaction  of  the  debt  of  the  grantor,  the  surety, 
as  to  minor  heirs  of  the  grantor,  takes  the  premises  charged  with  the  trust,  and 
the  original  trustee  will  be  responsible  for  a  breach  of  trust  by  his  grantee.  In 
such  case  an  order  to  the  original  trustee  to  convey  to  the  surety,  executed  by 
the  heirs  for  the  safety  of  the  original  trustee,  is  not  a  surrender  of  the  equity  of 
the  heirs  in  the  premises  so  conveyed,  unless  the  order  contain  words  which  ex- 
pressly or  by  inference  surrender  the  equity.  If  it  is  proved,  aliunde,  that  the 
object  of  the  order  to  convey  was  to  invest  the  grantee  of  the  original  title  with 
the  perfect  title,  relieved  of  all  equities,  such  order  can  only  be  held  effectual  for 
that  purpose  when  executed  with  a  proper  understanding  and  knowledge,  on  the 
part  of  the  heirs,  of  their  just  rights.  This  rule  applies,  though  there  has  been 
no  actual  fraud  or  imposition  practiced  on  the  heirs.  When  a  grantor  conveys 
premises  absolutely  in  fee  to  a  third  person  for  the  purpose  of  indemnifying  his 
surety,  with  the  assent  of  the  surety,  and  the  grantee  executes  a  declaration  of 
trust  accordingly,  the  conveyance  will,  in  equity,  be  deemed  a  mortgage,  and  the 
grantor  and  his  heirs  will  have  an  equity  of  redemption  in  the  premises,  until  it 
is  regularly  assigned,  foreclosed,  or  barred  by  lapse  of  time." 


426  HONORE  v.  HUTCHINGS, 

Honore  whether  he  would  pay  or  not,  and  if  he  failed  to  pay, 
that  Hatchings  would  be  without  remedy  as  to  his  share  of  the 
loss.  This  circumstance  is  not  conclusive,  nor  even  very  formi- 
dable. In  the  case  of  Edrington  v.  Harper,  before  cited,  it  was 
expressly  agreed  that  it  should  be  optional  with  the  mortgagors 
whether  they  would  repay  the  money  advanced  or  not,  and  yet 
the  court  held  that  this  being  virtually  the  fact  in  every  mort- 
gage as  to  whether  the  condition  should  be  forfeited  or  not,  it 
could  not  have  the  effect  of  converting  what  would  otherwise 
have  been  a  mortgage  into  a  conditional  sale. 

The  distinction  between  a  conditional  sale  and  a  mortgage,  as 
drawn  by  Greenleaf,  is  that  "  where  the  debt  forming  the  con- 
sideration of  the  conveyance  still  subsists,  or  the  money  is  ad- 
vanced by  ivay  of  loan,  with  a  personal  liability  on  the  part  of 
the  borrower  to  repay  it,  and  by  the  terms  of  the  agreement  the 
land  is  to  be  reconveyed  on  payment  of  the  money,  it  will  be 
regarded  as  a  mortgage ;  but  where  the  relation  of  debtor  and 
creditor  is  extinguished,  or  never  existed,  there  a  similar  agree- 
ment will  be  considered  as  merely  a  conditional  sale,"  2  Green- 
leaf's  Cruise,  note  1,  page  74. 

In  this  case,  Hutchings  advanced  the  money,  by  way  of  a 
loan,  to  his  copurchaser,  Honore,  who  is  personally  liable  to  re- 
pay it  with  interest  at  the  rate  of  ten  per  cent  per  annum,  and 
had  he  done  so  before  the  land  was  sold,  would  have  been 
entitled  to  a  conveyance  of  the  one-half  held  in  trust  for  him 
by  Hutchings.  The  fact  that  Hutchings  was  to  have  interest 
on  the  money  advanced  tends  very  strongly  to  show  that  it  was 
a  loan,  Colivellv.  Wood,  3  Watts,  196,  and  would  perhaps  war- 
rant that  conclusion,  even  if  the  fact  ,was  left  in  doubt  by  the 
terms  of  the  written  memorandum  of  agreement. 

It  is  further  insisted  that  Honore,  being  the  agent  of  Tiernan, 
could  not  have  become  a  joint  owner  of  the  land ;  that  the  policy 
of  the  law  forbade  him  from  selling  to  himself.  In  all  cases  in 
which  the  agent  has  discretion  as  to  the  price,  or  where  the 
principal  relies  upon  his  knowledge  or  information  as  to  the  value 
of  the  property,  and  expects  him  to  sell  for  what  in  his  opinion 
the  same  is  worth,  this  rule  should  be  inflexibly  enforced.  But 
in  this  case  Tiernan,  the  principal,  was  a  real  estate  agent  him- 
self, doing  business  within  a  short  distance  of  the  property  sold, 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  427 

and  well  acquainted  with  its  value.  He  fixed  the  price  at  which 
it  was  to  be  sold,  and  offered  to  sell  to  Honore,  or  any  one  else 
whom  he  could  find,  at  the  price  so  fixed.  Through  the  exer- 
tions of  his  agent,  he  secured  the  sale  of  his  property  at  the 
price  fixed  by  himself,  and  as  he  does  not  complain,  so  far  as  it 
appears  from  this  record,  of  bad  faith  or  unfairness  upon  .the 
part  of  Honore,  there  can  be  no  good  reason  why  Hutchings 
should  be  allowed  to  make  available  any  such  defense. 

Hence  we  conclude  that  Hutchings  held  the  legal  title  to  one- 
half  of  the  Tiernan  land  in  trust  for  Honore,  and  that  the  latter 
is  entitled  to  one-half  of  the  net  profits  realized  upon  the  ressNe 
of  the  same.  In  the  settlement  of  the  accounts  between  the 
parties,  Hutchings  should  be  credited  with  the  six  thousand  dol- 
lars advanced,  with  interest  at  the  agreed  rate  from  the  time  it 
was  paid  up  to  the  sale  of  the  land ;  also  with  all  other  amounts 
paid  by  him  on  account  of  taxes  or  assessments  against  the  land, 
or  of  other  necessary  and  proper  expenses  incurred  and  paid  by 
him  in  the  management  of  the  same,  with  legal  interest  on  each 
amount  from  the  time  of  payment  up  to  the  sale ;  and  in  these 
expenses  should  be  included  such  sum  as  he  may  have  paid  John 
M.  Tiernan  for  choice  of  lots  when  the  sixty  aci'e  tract  was 
divided.  He  should  also  be  credited  with  such  reasonable  and 
proper  fees  or  commissions  as  he  may  have  paid  to  his  agent  for 
negotiating  the  sale  of  the  land.  It  appearing  that  the  land  Avas 
sold  for  currency,  the  payments  which  Hutchings  may  have 
collected  should  be  scaled  to  their  actual  value  in  coin  at  the 
time  of  collection. 

The  judgment  of  the  court  below  is  reversed,  and  the  cause 
remanded  for  further  proceedings  consistent  with  this  opinion. 
And  to  prevent  further  and  unnecessary  litigation,  either  party 
who  desires  should  be  allowed  to  amend  his  pleadings  so  as  to 
properly  present  the  issues  indicated,  and  a  reasonable  time 
within  which  to  take  further  proof,  in  case  the  same  may  be 
necessary  under  the  amended  pleadings. 

In  this  case  Judge  HARDEST  did  not  sit. 

To  the  Petitions  of  counsel  of  Appellee  for  a  rehearing,  Judge 
LINDSAY  delivered  the  follotving  response  of  the  Court:  The 
learned  counsel  for  appellee,  in  their  uetitions  for  a  rehearing  of 


428  HONORE  v.  HUTCHINGS, 

this  appeal,  assume  that  the  contract  between  Hutchings  and 
Honore,  evidenced  by  the  writing  bearing  date  November  18, 
1861,  was  a  conditional  purchase  by  the  latter  of  one-half  of  the 
tract  of  land  afterward  conveyed  by  Tiernan  to  Hutchings. 

In  our  opinion,  this  assumption  is  not  warranted  by  the  facts 
presented  by  the  record.  On  the  day  the  writing  was  executed 
Hutchings  did  not  own  said  land,  but,  upon  the  contrary,  on 
that  day  he,  in  conjunction  with  Honore,  became  the  purchaser 
of  the  same  from  Tiernan.  There  was  no  sale  or  purchase, 
absolute  or  conditional,  between  the  two  contracting  parties ;  the 
exact  character  of  their  contract  of  purchase  from  Tiernan  is 
not  disclosed  by  the  record.  We  have  no  means  of  knowing 
whether  it  merely  existed  in  parol  or  was  evidenced  by  writing ; 
but  whatever  claim  they  had  to  the  land  was  a  joint  one,  each 
taking  as  an  equal  owner,  and  neither  of  them  having  the  power 
to  sell  to  the  other  an  undivided  moiety  without  divesting  him- 
self of  his  entire  interest.  It  is  clear  that  Hutchings  still  owned 
one-half  of  the  land  after  his  contract  with  Honore,  and  it  there- 
fore necessarily  results  that  no  sale  could  have  been  made.  The 
writing  was  not  intended  to  evidence  a  sale,  but  to  explain  why 
it  was  that  Honore,  who,  under  the  contract  with  Tiernan,  was 
entitled  to  one-half  of  the  land,  was  to  permit  Hutchings  to 
take  the  conveyance  of  the  entire  tract  to  himself.  The  nu- 
merous decisions  of  the  Supreme  Court  of  Illinois,  to  which  we 
have  been  referred,  were  rendered  in  cases  involving  questions 
growing  out  of  conditional  purchases  ;  and  the  doctrines  of  those 
decisions  do  not  essentially  differ  from  those  to  which  this  Court 
has  uniformly  adhered. 

In  the  case  of  Greene  v.  Cook,  24  Illinois  Rep.  190,  the  facts 
were  that  Greene  entered  the  land  and  paid  his  own  money  for 
it,  and  took  the  patent  out  in  his  own  name,  and  agreed  to  sell 
it  to  Cook  upon  condition  that  he  would  pay  him  an  amount 
agreed  upon  as  the  purchase-price,  on  or  before  a  certain  day. 
Cook  failed  to  make  the  payment,  and  a  second  contract  was 
made,  a  different  price  agreed  upon,  and  another  day  fixed  for 
the  payment.  The  transaction  was  held  to  be  a  conditional  sale. 
In  that  case  Cook  was  not  the  original  purchaser  of  the  land, 
although  Greene  entered  it  under  an  agreement  that  he  would 
give  a  bond  to  him  for  a  conveyance  upon  the  payment  of  the 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  429 

sum  agreed  upon  by  the  parties  within  a  stipulated  time.  Greene 
did  not  lend  to  Cook  the  money  or  the  land-warrant  with  which 
to  pay  for  the  land,  and  take  the  title  as  security  for  its  repay- 
ment. In  the  language  of  the  court,  "  nothing  was  said  or  done 
to  indicate  such  a  design.''  In  addition  to  this  fact,  after  the 
time  first  agreed  upon  had  expired,  a  new  contract  was  made  by 
which  Cook  abandoned  all  claim  to  the  land  under  the  first  ar- 
rangement, and  became  a  purchaser  in  the  broadest  and  most 
comprehensive  sense  in  which  that  term  is  used. 

The  contract  in  the  case  of  Milnor  v.  Milhvard,  39  Illinois, 
40,  was  clearly  a  purchase  upon  condition  of  prompt  payment  of 
the  agreed  price.  The  agreement  in  the  case  of  Brashcar  v. 
Gratz,  6  Wheaton,  529,  was  also  a  contract  of  sale  and  purchase, 
and  the  suit  was  prosecuted  by  the  party  in  default  to  enforce  a 
specific  execution  of  the  contract.  We  have  not  been  able  to 
procure  the  case  of  Perry  v.  Meddowcroft,  4  Beavan ;  but  if  it 
goes  as  far  as  stated  by  Hilliard,  the  principle  is  in  conflict  with 
the  decision  of  Chancellor  KENT,  in  the  case  cited  of  Boyd  v. 
Jf' Clain,  I  Johns.  Ch.  Rep.,  which  decision  we  regard  as  in 
perfect  accord  with  the  reason  and  philosophy  of  the  rules  of 
law  governing  such  transactions. 

The  opinion  originally  delivered  does  not  admit  of  the  con- 
struction placed  upon  it  by  counsel,  that  we  regarded  it  as 
optional  with  Honore  whether  or  not  he  would  pay  half  of  the 
purchase-price.  By  disconnecting  one  paragraph  from  the  re- 
mainder of  the  opinion,  and  considering  that  paragraph  isolated 
and  alone,  such  a  conclusion  might  possibly  be  reached ;  but 
when  the  context  is  considered,  we  think  it  will  be  manifest  to 
any  one  that  we  not  only  meant  to  convey  no  such  idea,  but 
stated  expressly  that  Honore  was  personally  liable  to  repay  the 
loaned  money,  with  interest  at  the  rate  of  ten  per  centum  per 
annum. 

Nor  do  we  decide  that  the  trust  in  favor  of  Honore  was 
created  by  the  contract  between  him  and  Hatchings,  but  that 
by  implication  of  law  a  trust  resulted  in  his  favor  because  of 
the  existence  of 'certain  facts,  among  others,  that  he  was  a  joint 
purchaser  of  the  land,  that  Hutchings  advanced  the  money  neces- 
sary to  pay  his  half  of  the  purchase-price  by  way  of  a  loan  to 
him,  that  he  was  personally  liable  to  repay  this  money  with  ten 


— 430—MfTo        HEATH  v.  THE  ERIE   RAILWAY  CO., 

per  cent  interest,  and  that  he  consented  that  Hutchings  should 
take  and  hold  the  legal  title  to  his  share  of  the  land  to  secure 
him,  on  account  of  his  advancement,  and  the  interest  agreed  to 
be  paid  thereon.  If  these  facts  are  established  by  the  record, 
and  we  feel  satisfied  that  they  are,  then  the  party  claiming  to  be 
the  cestui  que  trust  did  pay  all  of  his  share  of  the  purchase- 
money,  and,  according  to  the  Illinois  decisions  cited,  a  trust  was 
raised  in  his  favor  by  implication  of  law. 

A  careful  reconsideration  of  the  cause,  and  a  patient  inves- 
tigation of  the  authorities  to  which  we  have  been  referred,  have 
failed  to  convince  the  Court,  as  now  constituted,  that  the  opinion 
as  delivered  in  January  last,  does  not  settle  the  questions  in- 
volved in  accordance  with  the  well-established  principles  of 
equity,  and  we  are  therefore  constrained  to  overrule  the  motion 
for  a  rehearing,  as  well  as  that  of  the  appellant  for  a  modification 
of  said  opinion. 

Judge  HARDIN  did  not  sit  in  this  case  when  it  was  decided, 
and  did  not  participate  in  the  action  of  the  Court  in  passing 
upon  these  motions. 

[NOTE. — W.  P.  D.  BUSH,  Esq.,  the  Official  Reporter  of  the  Kentucky  Court  of 
Appeals,  has  kindly  furnished  advance  sheets  of  the  preceding  three  cases.] 


JOHN  BENJAMIN  HEATH,   et  als,  v.  THE  ERIE  RAILWAY  Co., 
JAY  GOULD,  JAMES  FISK,  JR.,  AND  FREDERICK  A.  LANE. 

[Decided  in  April,  1871,  in  the  United  States  Court  for  the  Southern 
District  of  New  York,  by  Judge  SAMUEL  BLATCHFORD.  Reported  in  8 
Blntchford's  Circuit  Court  Rep.  347.] 

The  cases  reviewed,  on  the  question  as  to  when  a  stockholder  in  a  private  corpo- 
ration will  be  allowed  to  file  a  bill  in  his  own  name,  on  behalf  of  himself 
and  all  others  standing  in  the  same  situation,  making  the  corporation  a 
party  defendant,  to  compel  the  ministerial  officers  of  the  corporation  to  ac- 
count for  breach  of  official  duty,  or  misapplication  of  corporate  funds  (a). 

(a)  See  preceding  case  of  Washington,  etc.  Railroad  Co.  v.  Alexandria  Railroad 
Co.,  page  268,  and  note  (6)  thereto  appended.  These  authorities  sustain  Judge 
BLATCHFORD'S  rulings,  and  for  that  reason  it  is  unnecessary  to  give  the  entire 
part  of  his  resume  of  the  cases  cited  by  him.  In  addition  to  those  already  re- 
ferred to,  Judge  B.  cites  Angell  &  Ames  on  Corporations,  sec.  312;  Robinson  v. 


CIRCUIT   COURT,  SOUTHERN  DISTRICT  OF  N.  Y.        431 

Where  the  bill  sets  out  acts  ultra  vires,  in  issuing  shares  of  stock,  and  breaches 
of  trust,  which  are  frauds  on  the  stockholders,  inasmuch  as  such  acts  and 
breaches  of  trust  are  beyond  the  power  of  the  corporation  to  affirm  or  sanc- 
tion, it  is  not  necessary  that  the  stockholder  should  aver  that  he  has  applied 
to  the  corporation  or  its  board  of  directors  to  bring  the  suit,  and  that  they 
have  refused. 

Where  the  corporation  is  under  the  control  of  the  defendants  who  must  be  sued, 
and  an  excuse  is  given  for  the  bringing  of  the  suit  by  the  stockholder,  which 
is  equivalent  to  a  refusal  by  the  directors,  on  request,  to  bring  the  suit,  the 
suit  may  be  brought  by  the  stockholder,  without  showing  such  request  and 
refusal. 

A  person  not  a  stockholder  can  not  be  joined  as  plaintiff,  in  such  a  bill,  with 
persons  who  are  stockholders,  and  if  the  suit  is  a  joint  one,  his  want  of  in- 
terest is  a  good  ground  of  demurrer  to  the  whole  bill. 

A  person  who  has  no  shares  standing  in  his  name  on  the  books  of  the  corpora- 
tion, is  not  a  stockholder,  although  he  holds  certificates  of  stock  issued  to 
other  persons  by  the  corporation,  with  powers  of  attorney  authorizing  the 
transfer  of  such  shares  to  him,  executed  by  the  persons  in  whose  names  the 
shares  stand  registered  on  the  books  of  the  corporation,  and  although  the 
corporation  has,  on  demand,  wrongfully  refused  to  allow  such  transfer  to 
be  made  to  him. 

If  several  trustees  are  all  of  them  implicated  in  a  common  breach  of  trust,  for 
which  the  cestui  que  trust  seeks  relief  in  equity,  he  may  bring  his  suit  against 
all  of  them,  or  against  any  of  them,  separately,  at  his  election,  the  tort  being 
treated  as  several  as  well  as  joint:  And  the  same  doctrine  applies  to  any 
wrong-doer  who  is  confederated  with  a  fraudulent  trustee. 

It  is  not  necessary  that  the  directors  of  the  corporation  should  be  made  parties 
to  the  bill,  although  the  bill  prays  for  an  injunction  against  the  corporation, 
and  for  a  receiver  of  the  corporation,  if  no  relief  is  asked  as  against  such 
directors. 

The  bill  in  this  case  was  allowed  to  be  amended  by  striking  out  the  name  of  a 
person  improperly  joined  as  plaintiff. 

THIS  case  came  up  on  four  separate  demurrers  to  the  whole 
bill,  by  the  four  several  defendants,  the  Erie  Railway  Company, 
Jay  Gould,  James  Fisk,  Jr.,  and  Frederick  A.  Lane,  who  were 
the  only  defendants  in  the  suit.  The  bill  was  sworn  to  on  the 
8th  of  April,  1870,  and  filed  on  the  same  day.  It  was  brought 
by  eight  persons  as  plaintiffs,  all  of  whom  were  aliens  and 
33ritish  subjects.  Six  of  the  eight  plaintiffs  were  the  owners  of 

Smith,  3  Paige,  222,  233  (a  leading  case  in  New  York);  Cunningham  v.  Pell,  5 
Paige,  607;  Peabody^.  Flint  (decided  in  1863),  6  Allen,  52;  Foss  v.  Harbottle,  2 
Haire,  461;  Mozley  v.  Alston,  1  Phillips,  790;  Gray  v.  Lewis  (decided  in  1869), 
English  Law  Rep.,  8  Equity  Cases,  526,  541;  Atwood  v.  Meriweather  (decided  in 
1867),  English  Law  Rep.,  5  Equity  Cases,  464,  note;  and  others. 

The  closing  part  of  Judge  BLATCHFORD'S  opinion,  on  this  point,  follows  in  that 
part  of  this  report  which  is  considered  too  important  to  omit. 


432  HEATH  v.  THE  ERIE  RAILWAY  COMPANY; 

shares  of  what  was  known  as  the  common  capital  stock  of  the 
Erie  Railway  Company,  which  was  a  corporation  created  under 
the  laws  of  the  state  of  New  York,  and  which  shares  stood  in 
their  names  on  the  books  of  the  company.  One  of  the  eight 
plaintiffs  was  the  owner  of  shares  of  what  was  known  as  the 
preferred  capital  stock  of  the  company,  and  which  shares  stood 
in  his  name  on  the  books  of  the  company.  The  remaining 
plaintiff,  Burt,  was  alleged  to  be  the  owner  and  holder  of  shares 
of  the  preferred  capital  stock  of  the  company,  for  which  he  held 
certificates  issued  by  the  company,  but  not  to  him,  and  a  power 
of  attorney  authorizing  the  transfer  of  the  shares  to  him,  exe- 
cuted by  the  persons  in  whose  names  such  shares  stood  regis- 
tered on  the  books  of  the  company.  It  was  also  alleged  that  he 
was  entitled  to  have  such  shares  standing  in  his  name  on  the 
books  of  the  company,  but  that  he  had  been  prevented  there- 
from by  the  wrongful  refusal  of  the  company  to  allow  such  trans- 
fer to  be  made  to  him,  upon  his  demand  duly  made  therefor. 

The  bill  was  very  voluminous.  Its  allegations  were,  in  sub- 
stance, as  follows : 

(1.)  The  company  owns  and  operates  a  railroad  extending  from  Dunkirk, 
and  likewise  from  Buffalo,  on  Lake  Erie,  to  Piermont  and  Newburg,  on  the  Hud- 
son River,  twenty-six  miles  of  the  route  being  through  the  state  of  Pennsylvania, 
and  the  rest  through  the  state  of  New  York,  and  also  controls  and  operates  a  line 
of  railroad  extending  from  its  main  line  to  Jersey  City,  with  a  ferry  connection 
to  the  city  of  New  York.  (2.)  On  the  31st  of  December,  1865,  the  capital  stock 
of  the  company  consisted  of  $8,535,700  of  preferred  stock,  and  $16,570,100  of 
common  stock,  being  a  total  of  $25,105,800  in  shares  of  $100  each,  the  preferred 
stock  being  entitled,  in  preference  over  the  common  stock,  to  dividends  up  to  the 
rate  of  seven  per  cent  per  annum,  payable  semi-annually  out  of  the  net  savings 
of  the  railroad  during  the  current  year,  after  the  payment  of  mortgage  interest. 
(8.)  At  the  election  for  directors  of  the  company,  seventeen  in  number,  in  Octo- 
ber, 1867,  the  defendants,  Gould,  Fisk,  and  Lane,  and  one  John  S.  Eld  ridge,  were 
the  chief  movers  in  a  combination  which  resulted  in  the  election,  as  directors,  of 
themselves  and  five  new  directors  and  eight  old /directors,  Lane  having  been  a 
director  during  the  previous  year,  and  Gould,  Fisk,  and  Eldridge  being  also  new 
directors.  The  directors  BO  elected,  other  than  Gould,  Fisk,  Lane,  and  Eldridge, 
were  Henry  Thompson.  Levi  Underwood,  Josiah  Bardwell,  Eben  D.  Jordan,  James 
8.  Whitney,  William  Evans,  Alexander  S.  Diven,  J.  C.  Bancroft  Davis,  Homer 
Ramsdell,  Dudley  S.  Gregory,  William  B.  Skidmore,  Frank  Work,  and  George  M. 
Groves.  (4.)  This  election  was  accomplished,  chiefly  or  entirely,  by  illegitimate 
means;  namely,  by  the  purchase  of  proxies  for  voting,  and  by  borrowing  or  pur- 
chasing and  holding,  for  the  briefest  possible  period,  shares  of  stock,  in  order 
that  the  same  might  stand  in  the  names  of  some  of  the  parties  acting  in  concert 
with  them,  or  whose  proxies  they  could  obtain  on  the  day  of  closing  the  transfer- 


CIRCUIT  COURT,  SOUTHERN  DISTRICT  OF  N.  Y.        433 

books  preparatory  to  the  election,  the  plan  being  to  obtain  control  of  the  company 
without  any  real  proprietorship  in  any  considerable  portion  of  its  stock,  in  order 
that  such  control  might  be  made  subservient  to  the  private  gain  of  the  majority 
of  the  board,  consisting  of  the  new  members  and  Lane,  without  regard  to  the  in- 
terests of  the  company,  or  the  equitable  rights  of  its  real  shareholders.  (5.)  The 
chief  immediate  object  in  obtaining  control  of  the  company  at  the  time,  was  to 
commit  it  to  engagements  in  aid  of  the  building  of  the  Boston,  Hartford,  and  Erie 
Railroad,  in  which  some  of  the  parties,  and  particularly  Eldridge,  was  largely 
interested;  and  such  aid  was  given,  in  the  form  of  a  guarantee,  by  the  company, 
of  the  bonds  of  the  Boston,  Hartford,  and  Erie  Railroad  Company.  (6.)  .  .  . 
The  latter  company  has  since  suspended  payment.  (7.)  The  election  of  directors 
in  October,  1867,  was  accomplished  by  the  use  of  about  $70,000  of  the  money  of 
the  Boston,  Hartford,  and  Erie  Railroad  Company,  placed  in  the  hands  of  Gould 
for  the  purpose.  (8.)  The  furnishing  of  the  money,  its  use,  the  accomplishment 
of  the  election,  and  the  guarantee  of  the  bonds,  were  all  part  of  a  fraudulent  con- 
spiracy by  which,  in  return  for  the  money  to  accomplish  the  election,  Gould,  Fisk, 
and  Lane  should  betray  their  trust  as  directors,  by  using  their  influence  in  favor 
of  the  guarantee  of  the  bonds,  to  the  prejudice  of  the  interests  of  the  company, 
and  should  find  their  own  compensation  in  such  personal  advantages  as  they  could 
obtain  by  means  of  their  trust  and  power  as  directors.  (9.)  On  the  30th  of  Sep- 
tember, 1867,  the  total  amount  of  the  preferred  and  common  stock  of  the  company 
was  $25,111,210.  (10.)  In  February,  1868,  the  total  amount  of  the  stock  was 
$32,801,910,  being  $8,536,910  of  preferred  stock,  and  $24,265,000  of  common 
stock.  (11.)  Up  to  February,  1868,  the  company  had  not  only  met  the  interest  on 
its  bonds,  but  had  paid  regular  cash  dividends  of  seven  per  cent  per  annum  on  its 
preferred  stock  and  dividends,  although  not  regularly,  on  its  common  stock,  and 
the  market  value  of  its  common  stock  was  between  seventy  and  eighty  per  cent. 
(12.)  In  February,  1868,  the  company  had  its  roads  in  successful  operation,  and 
substantially  owned  the  property  of  the  Long  Dock  Company,  and  also  owned  a 
large  amount  of  property  proper  for  use  in  operating  its  roads,  which  consisted  of 
four  hundred  and  fifty-nine  miles  of  main  road,  and  three  hundred  and  fourteen 
miles  of  branches  and  leased  roads,  there  being  a  double  track  of  about  three 
hundred  and  sixty-two  miles  of  its  main  line,  and  its  average  gross  earnings,  for 
the  three  years  last  past,  had  been  about  $15,000,000  per  year. 

[The  great  importance  of  this  case,  aside  from  its  celebrity,  justifies  an  ex 
tended  report  of  it.  The  allegations  of  breaches  of  trust  and  specifications  of 
fraud  occupy  forty  pages  of  the  original  report,  and  consequently  preclude  their 
republication  at  length.  But  for  the  practical  use  of  the  profession,  they  are  ab- 
stracted with  as  much  fullness  as  circumstances  will  permit.  The  entire  report 
embraces  sixty  pages.] 

Specifications  13,  14,  15,  and  16,  charge  that  Gould,  Fisk,  and  Lane,  with 
others  of  the  directors,  made  an  issue  of  the  common  stock  of  the  company,  by 
first  issuing  the  bonds  of  the  company  to  the  amount  of  $5,000,000,  "purporting 
to  confer  upon  the  holders  the  right  to  convert  the  principal  sum  into  the  stock 
of  the  company,"  and  which  were  shortly  thereafter  converted  into  stock.  That 
the  amount  the  company  received  therefor  did  not  exceed  $3,625,000;  "but  a 
large  sum  was  realized  therefrom  by  Gould,  Fisk,  and  Lane,  and  their  confeder- 
ates, and  divers  methods  were  adopted  to  cover  up  and  conceal  the  excess  and 
deprive  the  company  of  the  benefit  thereof,  and  enable  the  said  confederates  to 

28 


434  HEATH  v.  THE  ERIE  RAILWAY  COMPANY; 

retain  the  same  for  their  private  profit."  Specifications  17  and  18  allege  the  is- 
suing of  $5,000,000  more  common  stock  of  the  company,  and  set  out  the  manner 
of  its  accomplishment;  and  by  which  the  company  realized  therefor  only  $3,625,- 
000  (the  sale  of  the  bonds  being  at  eighty  cents  on  the  dollar),  and  the  residue 
of  the  proceeds,  being  the  sum  of  $375,000,  was  wrongfully  withheld  from  the 
company  by  Gould  and  Fisk,  in  combination  with  Lane  and  others.  (19.)  Al-i 
most  immediately  after  the  last  fifty  thousand  shares  of  stock  were  issued,  Gould, 
Fisk,  and  Lane,  with  certain  of  their  confederates,  in  order  to  avoid  the  legal 
consequences  of  their  acts,  and  to  withdraw  the  pecuniary  fruits  of  the  operation 
from  the  jurisdiction  of  the  courts  of  the  State  of  New  York,  fled  to  Jersey  City, 
carrying  with  them  many  millions  of  dollars,  the  property  of  the  company,  being 
proceeds  of  the  stock  or  bonds,  and  remained  there  until  they  succeeded,  by  the 
use  of  the  money  of  the  company  and  other  corrupt  means,  in  effecting  ari'ange- 
ments  for  their  return,  when  they  returned.  (20.)  During  such  period,  "  they 
employed  paid  guards"  from  the  funds  of  the  company.  Specification  21  shows 
the  action  of  the  New  York  Legislature  in  regard  to  these  issues  of  stock. 
(22.)  In  July,  18G8,  Eldridge  resigned  his  presidency  of  the  company,  as  the  re- 
sult of  an  agreement  between  him  and  Gould,  Fisk,  and  Lane,  that  he  should  do 
so,  and  that  the  company  should  purchase  the  bonds  of  the  Boston,  Hartford,  and 
Erie  Railroad  Company,  to  the  amount  of  $5,000,000,  or  thereabouts.  Jay  Gould 
was  made  president  in  his  place.  At  the  same  time,  Gould,  Fisk,  and  Lane  se- 
cured the  control  of  the  Executive  Committee  of  the  company,  by  becoming  three 
of  the  five  members,  and  the  company,  by  the  procurement  of  Gould,  Fisk,  and 
Lane,  purchased  the  bonds  of  the  Boston,  Hartford,  and  Erie  Railroad  Company, 
to  the  amount  of  $5,000,000,  and  they  were  paid  for  out  of  the  funds  of  the  com- 
pany. (23.)  Such  purchase  of  bonds  was  illegal  and  beyond  the  corporate  powers 
of  the  company,  and  resulted  in  a  large  loss  to  the  company ;  .  .  .  and  that 
said  parties  knew  the  same  to  be  illegal,  but  consummated  the  same  in  order  to 
get  the  control  of  the  company  as  aforesaid.  Specifications  24,  25,  and  26,  set 
up  that  suits  had  been  brought  by  Richard  Schell,  and  by  the  procurement  of 
Cornelius  Vanderbilt  against  Fisk,  Gould,  and  Lane,  and  the  company,  in  which 
it  was  sought  to  make  the  said  Fisk,  Gould,  and  Lane,  individually  liable  for 
large  sums  of  money;  and  that  to  release  themselves  from  their  responsibilities, 
they  paid  from  the  moneys  and  means  of  the  company,  to  said  Schell,  the  sum  of 
$429,000,  and  $1,000,000  to  Vanderbilt.  Besides  which,  on  behalf  of  the  com- 
pany, and  as  a  part  of  the  same  transaction,  they  purchased  of  Vanderbilt  fifty 
thousand  of  the  shares  of  the  stock  of  the  company,  and  paid  a  price  exceeding 
its  market  value,  to  wit,  $3,500,000,  "resulting  in  a  large  loss  to  the  company." 
Items  26,  27,  and  28,  specify  other  wrongful  payments  by  Gould,  Fisk,  and  Lane, 
from  the  funds  of  the  company,  and  that  during  that  time  Gould  was  treasurer 
of  the  company,  and  made  the  payments,  knowing  the  same  to  be  illegal.  (29.) 
Specifies  the  large  sums  of  money  of  the  company,  aside  from  the  current  earn- 
ings of  the  road,  which  came  to  the  hands  of  Gould,  as  treasurer;  and  (30.) 
That  from  Eldridge's  retiracy,  in  July,  1868,  until  October,  1868,  "as  well  as 
subsequently,  Gould,  Fisk,  and  Lane  had  practically  in  their  own  hands  the  entire 
control  of  the  affairs  and  funds  of  the  company."  (31.)  In  July,  1868,  "Fisk 
was  made  comptroller  of  the  company,  and  has  since  continued  to  exercise,  except 
as  Gould  and  Lane  have  participated  therein,  control  over  the  allowance  and  dis- 
allowance of  claims  against  the  company.  Gould,  as  president  and  treasurer  of 
the  company,  has  had  supreme  control  over  the  company's  funds,  except  in  so  far 


CIRCUIT  COURT,  SOUTHERN  DISTRICT  OF  N.  Y.        435 

as  Fisk  and  Lane  may  have  participated  therein,  and  has  made  such  uses  thereof 
from  time  to  time,  as  would  best  serve  the  ends  of  himself  and  Fisk  and  Lane. 
Lane,  at  the  same  time,  was  made,  and  has  thenceforth  continued  to  be,  the  coun- 
sel of  the  company,  with  the  addition  of  large  powers  to  those  previously  exer- 
cised by  the  counsel  of  the  board."  (32.)  From  July  to  October'  1868,  there  was 
no  meeting  of  the  board,  and  the  powers  of  the  company  were  exercised  by  Gould, 
Fisk,  and  Lane,  or  by  them  through  the  Executive  Committee,  in  which  they  con- 
stituted a  majority.  (33.)  "In  anticipation  of  the  election  of  directors  to  be  held 
in  October,  1868,  Gould,  Fisk,  and  Lane  contrived  a  scheme  for  causing  them- 
selves, and  such  other  persons  only  as  they  should  choose  for  the  purpose,  to  be 
elected  directors  of  the  company  at  such  election ;  and  in  order  to  carry  out  such 
scheme,  they  put  in  execution  divers  illegitimate  and  fraudulent  devices.  Having 
made  such  arrangements  as  that,  at  a  given  date,  a  very  large  amount  of  stock 
should  stand  on  the  books  in  the  names  of  themselves  and  their  confederates,  and 
of  persons  whose  proxies  for  voting  they  could  secure  by  purchase  or  otherwise, 
Gould,  Fisk,  and  Lane,  as  a  majority  of  the  Executive  Committee,  without  the 
knowledge  of  the  other  members  of  the  committee,  and  without  any  action  or 
knowledge  of  the  Board  of  Directors,  or  the  knowledge  of  any  member  of  it,  save 
themselves,  and  without  any  previous  public  notice  of  an  intention  so  to  do,  sud- 
denly closed  the  stock  transfer-books  of  the  company  on  the  19th  of  August,  being 
about  sixty  days  before  the  annual  election,  and  at  least  thirty  days  earlier 
than  the  by-laws  of  the  company  contemplated,  or  the  stockholders  anticipated, 
or  than  had  been  the  usage  of  the  company.  They  pretended  to  keep  such  trans- 
fer-books closed  from  that  time  until  the  election,  so  that,  during  such  period,  no 
stock  could  properly  be  transferred  into  the  name  of  any  person  so  as  to  enable 
him  to  vote  thereon,  or  to  prevent  the  same  from  being  voted  on  by  [another  than] 
the  person  in  whose  name  it  happened  to  stand  at  the  time  of  closing  the  books. 
But  transfers  were,  during  such  period,  caused  by  Gould,  Fisk,  and  Lane  to  be 
secretly  made  in  certain  cases  where  such  transfer  would  increase  the  voting 
power  of  themselves  and  their  confederates,  although  transfers  were  not  per- 
mitted in  any  other  case.  Such  arrangements  had  been  made  by  Gould,  Fisk, 
and  Lane,  and  their  confederates,  that  when  the  transfer-books  were  so  closed, 
there  stood  thereon  in  the  names  of  themselves  "  and  their  confederates,"  one  hun- 
dred and  fifty-three  thousand  six  hundred  and  forty  shares  of  stock,  the  voting 
power  on  which  at  such  election  was  controlled  by  Gould,  Fisk,  and  Lane,  the 
whole  number  of  shares  voted  on  at  such  election  being  two  hundred  and  seventy- 
four  thousand  eight  hundred  and  seventy-four.  (34.)  Although,  at  the  time  of 
the  closing  of  the  transfer-books,  there  stood  in  the  names  of  the  firms  with  which 
Gould  and  Fisk  were  connected,  stock  to  the  nominal  amount  of  nearly  $12,000,- 
000,  Gould  and  Fisk,  as  to  much  the  greater  proportion  thereof,  had  not,  nor  had 
their  said  firms,  any  beneficial  proprietorship  of  such  stock.  Such  of  the  stock  as, 
in  fact,  belonged  to  Gould  and  Fisk,  or  any  of  their  firms,  had,  in  great  part,  been 
acquired  by  the  use  of  the  money  of  the  company.  (35.)  Gould,  Fisk,  and  Lane 
made  a  pretended  issue  and  delivery  of  convertible  bonds  of  the  company,  to  the 
amount  of  many  millions  of  dollars,  and  caused  to  be  executed  certificates  for  a 
great  amount  of  stock,  into  which  such  bonds  were  proposed  to  be  converted,  with 
the  design  of  voting  on  such  stock,  if  necessary,  in  order  to  control  the  election ; 
but  the  new  stock  was  not  created,  for  the  reason  that  they  were  enabled  by  other 
devices  to  cast  votes  enough  to  control  the  election.  (36.)  Shortly  before  the  elec- 
tion, Gould,  Fisk,  and  Lane,  having  secured  to  themselves  the  power  of  controlling 


436  HEATH  v.  THE  ERIE  RAILWAY  COMPANY; 

the  election,  procured  to  be  signed  by  several  of  the  persons  whom  they  proposed 
to  elect  as  directors,  a  paper,  by  which  such  persons  pledged  themselves  to  sup- 
port the  policy  of  Gould,  or  resign  their  directorship,  and  they  were  elected  di- 
rectors under  said  pledge.  (37.)  Gould,  Fisk,  and  Lane,  or  one  of  them,  voted  at 
such  election  on  a  large  number  of  shares,  in  virtue  of  proxies  for  voting  which 
they  purchased  from  parties  in  whose  names  the  stock  stood,  which  parties,  in 
many  of  such  instances,  were  not  the  actual  owners  of  such  stock,  but  had  pre- 
viously parted  with  it,  and  made  delivery  by  handing  over  the  certificate,  with 
power  of  attorney  to  transfer.  The  price  paid  for  such  proxies  was  derived  from 
tlie  funds  of  the  company.  (38.)  At  such  election,  in  October,  18G8,  Gould,  Fisk, 
and  Lane  caused  the  following  persons,  in  addition  to  themselves,  to  be  elected 
directors  of  the  company  for  the  then  ensuing  year:  William  M.  Tweed,  Peter 
B.  Sweeney,  Daiiiel  S.  Miller,  Alexander  S.  Diven,  George  M.  Diven,  Homer  Rams- 
dell,  John  Hilton,  George  M.  Groves,  John  Ganson,  Charles  G.  Sisson,  0.  W.  Chap- 
man, J.  C.  Bancroft  Davis,  Henry  Thompson,  and  William  B.  Skidmore.  Davis 
and  Skidmore,  when  they  came  fully  to  understand  the  purposes  of  Gould,  Fisk, 
and  Lane,  resigned  their  offices  as  directors.  Immediately  on  the  election  being 
made,  a  meeting  of  the  Board  of  Directors  was  held,  at  which  the  only  business 
transacted  was  to  elect  Gould,  President,  Alexander  S.  Diven^  Vice-President, 
Fisk,  Comptroller,  and  Gould,  Fisk,  Lane,  Tweed,  and  Miller,  the  Executive  Com- 
mittee, and  such  persons  respectively  held  such  offices  until  October,  1869.  Miller 
is  a  brother-in-law  of  Gould,  and  wholly  under  his  influence.  Tweed  was  and  is 
in  entire  accord  with  Gould,  Fisk,  and  Lane.  Alexander  S.  Diven  is  a  person  of 
integrity  and  good  capacity,  and  of  experience  in  railroad  management,  and  had 
formerly  been  an  active  executive  manager  of  the  company,  but  the  position  of 
Vice-President  was  a  nominal  one,  and  especially  in  view  of  such  pledge  made 
by  the  directors,  said  Diven  was  powerless  to  thwart  the  schemes  of  Gould,  Fisk, 
and  Lane.  (39.)  From  and  after  the  day  of  such  election,  in  October,  1868,  until 
the  election  of  a  new  board  in  October,  18C9,  no  meeting  of  the  Board  of  Directors 
of  the  company  was  held,  except  in  a  single  instance,  where  a  company,  with 
whom  a  contract  was  being  made,  insisted  that  the  contract  should  be  ratified  by 
the  board,  on  which  occasion  a  special  meeting  of  the  board  was  called  for  that 
single  purpose,  and  no  other  business  was  transacted.  (40.)  During  the  entire 
year,  from  October,  1868,  to  October,  1869,  Gould,  Fisk,  and  Lane,  in  virtue  of 
their  offices  of  President,  Treasurer,  Comptroller,  and  Counsel,  and  as  the  control- 
ling majority  of  the  Executive  Committee,  had  in  their  own  hands  and  exercised 
the  absolute  control  of  the  affairs  of  the  company,  and  its  funds  and  property; 
and,  whatever  was  done  during  such  period  in  respect  of  the  company  and  its 
nffairs,  was  under  the  control  of  Gould,  Fisk,  and  Lane,  and  they  are  responsible 
therefor,  and  for  the  results  thereof,  as  fully  as  if  there  had  been  no  Board  of  Di- 
rectors. (41.)  During  such  period,  not  only  did  the  board  exercise  no  control,  as 
a  board,  over  the  management  of  the  company,  but  the  doings  of  Gould,  Fisk, 
and  Lane,  as  controlling  members  of  the  Executive  Committee,  were,  for  the  most 
part,  kept  by  them  from  the  knowledge  of  the  individual  members  of  the  board, 
except  those  who  were  the  close  allies  and  confederates  of  Gould,  Fisk,  and  Lane, 
in  their  schemes  of  private  gain  and  spoliation  of  the  company,  and  excepting 
those,  the  directors  of  the  company  knew  little  or  nothing  more  of  what  was  going 
on  in  its  affairs,  than  if  they  had  not  been  directors. 

[Specificatiorts  42  to  63,  inclusive,  are  similar  in  character  to  those  preced- 
ing, as   well   as  hereinafter  given  in   full.     They   specify   several  breaches  of 


CIRCUIT   COURT,  SOUTHERN  DISTRICT  OF  N.  Y.        437 

trust — involving  millions — and  are  referred  to  in  Judge  BLATCIIFORD'S  opinion 
hereinafter.] 

(54.)  During  the  entire  period,  from  the  time  when  Gould,  Fisk,  and  Lane 
acquired  a  control  in  the  affairs  of  the  company,  and  more  especially,  from  the 
time  when  they  acquired  complete  control  in  July,  1808,  continuously  up  to  the 
present  time,  they  have  respectively,  from  time  to  time,  and  on  a  great  many  oc- 
casions, and  habitually,  taken  advantage  of,  and  abused  their  trust  as  directors, 
officers,  and  managers  of  the  company,  in  the  making  of  transactions  on  behalf 
of  the  company  on  one  side,  in  which  they  or  some  of  them  wei'e  interested  on 
the  other  side,  and  wherein  they  obtained  great  gains  to  themselves  to  the  loss  of 
the  company.  (55.)  In  some  instances,  such  adverse  private  interests  of  theirs 
were  in  the  shape  of  their  being  stockholders  in  the  company  thus  entering  into 
transactions  with  the  Erie  Railway  Company.  In  other  instances,  the  transac- 
tion purported  to  be  made  with  some  other  person  than  themselves,  and  without 
any  interest  of  theirs  being  apparent  on  the  face  of  it,  although  such  private  in- 
terest really  existed.  In  other  instances,  they,  or  some  of  them,  received  for 
their  own  private  uses  from  the  parties  with  whom  the  transaction  was  had, 
allowances  by  way  of  compensation  for  their  influence  as  managers  of  the  com- 
pany, in  causing  the  transaction  to  be  entered  into  on  its  behalf.  In  other  in- 
stances, they,  or  one  of  them,  were  openly  sellers  or  lessors  of  property  to  the 
company,  or  purchasers  of  property  from  the  company,  or  otherwise  dealers  with 
the  company,  and  the  terms  on  which  the  company  was  made  to  enter  into  the 
transactions,  were  determined  on  the  part  of  the  company,  by  them  as  its  con- 
trolling managers,  notwithstanding  their  personal  interest  adverse  to  the  com- 
pany, and  such  terms  were  fixed  -beneficially  to  their  private  interest,  and 
unfavorably  to  the  interests  of  the  company.  (56.)  Among  such  transactions 
was  the  purchase,  on  behalf  of  the  company,  of  a  water-front  property  on  the  Jer- 
sey shore,  known  as  the  Weehawken  Docks  property,  for  which  the  company  was 
to  pay,  or  agree  to  pay,  the  excessive  price  of  about  $1,600,000,  and  expenditures 
on  such  property ;  the  purchase  of  numerous  other  parcels  of  real  estate  in  New 
Jersey,  and  expenditures  thereon ;  and  the  lease  to  the  company,  at  an  extrava- 
gant rent,  of  the  offices  which  it  occupies  in  the  building  known  as  the  Grand 
Opera-house,  on  the  corner  of  Eighth  Avenue  and  Twenty-third  Street,  in  the 
city  of  New  York,  of  which  building  Gould  and  Fisk,  or  one  of  them,  claim  to  be 
owner  or  owners.  (57.)  The  purchase  of  the  said  Grand  Opera-house,  and  of  a 
number  of  adjacent,  houses  and  lots,  was  made  by  Gould  and  Fisk,  or  one  of  them, 
for  about  $700,000,  of  which  about  $300,000  was  paid  in  money,  and  the  remain- 
ing $400,000  was  secured  by  bond  and  mortgage  on  the  premises.  Thereupon, 
Gould,  Fisk,  and  Lane,  as  managers  of  the  company,  took  a  lease  for  a  long  term 
from  Gould  and  Fisk  individually,  or  one  of  them,  of  a  portion  of  the  building, 
to  be  occupied  for  the  business  offices  of  the  company,  and  fixed  the  rent  therefor 
at  an  amount  far  beyond  its  true  rental  value,  and  much  greater  than  could  in 
any  case  with  propriety  be  paid  for  business  offices  suitable  for  the  occupation  of 
the  company,  the  rent  so  fixed  being  at  the  rate  of  $45,000  per  year.  The  sum  of 
$300,000,  which  was  paid  on  account  of  the  purchase-money  of  such  premises,  or 
the  greater  portion  thereof,  was  in  fact  taken  by  Gould  and  Fisk  from  the  funds 
of  the  company,  under  their  control  as  trustees;  and  such  use  of  the  funds  of  the 
company  for  their  private  purposes  is  by  them  pretended  to  be  justified  by  the 
allegation  that  such  amount  was  advanced  by  the  company  to  them  on  account 
and  in  anticipation  of  the  rent  to  become  due  from  the  company  under  such  lease. 


438  HEATH  v.  THE  ERIE  RAILWAY  COMPANY; 

A  large  additional  amount  of  the  money  of  the  company  has  been  expended  by 
Gould,  Fisk,  and  Lane  in  furnishing,  fitting  up,  and  decorating  the  offices  thus 
leased,  in  an  unsuitably  extravagant  style.  (58.)  At  the  time  of  making  such 
lease,  the  company  was  in  the  occupation  of  business  offices  at  the  foot  of  Duane 
Street,  in  the  city  of  New  York,  which  is  the  starting-point  of  the  ferry  which 
connects  their  road  with  the  New  York  side,  which  offices  had  been  occupied  by 
them  for  many  years,  and  were  sufficient  and  suitable  for  their  legitimate  pur- 
poses. Such  new  offices  are  located  in  a  portion  of  the  city  inconvenient  for  the 
legitimate  purposes  of  their  business.  The  location  of  the  business  offices  of  such 
a  corporation  in  a  building  occupied,  as  is  said  Grand  Opera-house,  for  theatrical 
entertainments,  under  the  management  and  direction  of  Fisk,  one  of  the  officers 
of  the  company,  is  unsuitable,  discreditable'  and  prejudicial  to  the  interests  of 
the  company,  and  the  keeping  of  the  books  and  records  of  the  corporation  in  a 
building  used  as  a  theater,  is  unsafe  and  improper. 

[Specification  59  sets  up  what  is  claimed  as  the  legal  rights  of  the  company 
under  the  circumstances  attending  the  purchase,  etc.,  of  the  Grand  Opera-house, 
to  wit:  That  the  company  is  entitled  to  an  equitable  lien  on  the  same  for  all  moneys 
used  or  advanced  as  aforesaid  (a).] 

(60.)  During  the  period  in  which  Gould,  Fisk,  and  Lane  have  had  the  control 
of  the  company,  they  have  made  great  profits  to  themselves,  and  subjected  the 
company  to  great  loss,  by  a  system  of  favoritism  and  discrimination  in  the  rates 
of  freight  for  transportation  over  said  road  of  various  articles,  and  especially 
petroleum,  in  cases  where  articles  thus  transported  belonged  to  Gould,  Fisk,  and 
Lane,  or  one  of  them,  or  to  firms  or  companies  in  which  they  or  some  of  them  had 
pecuniary  interests,  such  discrimination  being  made,  in  many  instances,  in  ad- 
justing the  charges  for  transportation  of  freight,  or  by  making  drawbacks  or 
returns  of  portions  of  the  freight  nominally  charged,  to  an  extent  which  drove 
off  other  shippers  from  sending  their  freight  by  said  road.  .  .  .  (61.)  Gould, 
Fisk,  and  Lane,  on  many  different  occasions  since  they  acquired  the  control  of 
the  company,  have  wrongfully  applied  large  amounts  of  the  funds  and  property 
of  the  company  to  the  acquisition  of  property,  professedly  for  the  company, 
which  the  company  had  no  legal  right  so  to  acquire.  .  .  . 

[These  and  similar  transactions  are  charged  to  have  been  done  by  "Gould, 
Fisk,  and  Lane,  in  bad  faith,  and  with  full  knowledge  of  such  illegality."  Speci- 
fication G3  sets  forth  the  transactions  of  Gould,  Fisk,  and  Lane  with  the  Narra- 
ganset  Steamship  Company,  wherein  the  funds  of  the  Erie  Railway  Company 
are  alleged  to  have  been  used  for  their  benefit ;  and  64  asks  an  accounting  therefor.] 

(65.)  Gould,  Fisk,  and  Lane,  since  they  have  had  the  control  of  the  company, 
have  been  accustomed  to  make  large  profits  to  themselves,  respectively,  in  con- 
nection with  the  furnishing  of  supplies  to  it,  in  the  shape  of  discounts,  broker- 
ages, bonuses,  and  in  other  forms.  .  .  .  (60.)  On  the  20th  of  May,  1869,  an 
act  was  passed  by  the  Legislature  of  New  York,  providing  as  follows:  "No  stock- 
holder, director,  or  officer  of  either  the  New  York  Central  Railroad  Company,  the 
Hudson  River  Railroad  Company,  or  the  Harlem  Railroad  Company,  shall  be  a 
director  or  officer  of  the  Erie  Railway  Company,  and  no  stockholder,  director,  or 

(a)  The  Erie  Railway  Company,  under  its  present  (October,  1872)  manage- 
ment, has  brought  suit  for  the  recovery  of  the  Grand  Opera-house  from  Gould 
and  the  representative  of  Fisk,  now  deceased. 


CIRCUIT  COURT,  SOUTHERN  DISTRICT  OF  N.  Y.        439 

officer  of  the  latter  company  shall  be  a  director  or  officer  of  either  of  the  three 
first  named  companies.  The  Board  of  Directors  in  each  of  said  companies  may 
so  classify  the  members  of  such  board,  by  lot  or  otherwise,  that,  as  nearly  as 
may  be,  one-fifth  of  their  number  shall  go  out  of  office  at  each  annual  election; 
and,  at  the  next  election  of  directors  in  each  of  the  said  companies,  directors 
shall  be  voted  for  only  in  place  of  those  whose  term  shall  then  expire  under  the 
classification  aforesaid."  That  act  was  procured  to  be  passed  by  Gould,  Fisk, 
and  Lane,  with  the  co-operation  of  Tweed,  who  was  a  member  of  the  Legislature, 
they  pretending  therein  to  represent  the  company.  The  provision  thereof  pur- 
porting to  authorize  such  a  classification  of  the  Board  of  Directors  as  to  extend 
their  terms  of  office  to  periods  of  from  one  to  five  years  instead  of  a  uniform  term 
of  one  year,  was  obtained  by  Gould,  Fisk,  and  Lane  for  the  sole  purpose  of  en- 
abling themselves  to  perpetuate,  for  a  long  term,  their  control  of  the  company  for 
their  own  private  gain,  despite  the  will  of  the  stockholders;  and  the  passage  of 
the  act  was  not  applied  for  by  either  of  the  other  three  companies  named  therein, 
and  neither  of  them  has  taken  any  action  under  the  act.  (67.)  Gould,  Fisk,  and 
Lane  illegally  and  fraudulently  expended  a  large  amount  of  the  funds  of  the 
company  in  order  to  obtain  the  passage  of  such  act.  Its  passage  was  obtained 
by  means  of  the  corrupt  expenditure  of  large  sums  of  money  of  the  company  in 
influencing  the  action  of  members  of  the  Legislature  in  favor  of  the  bill;  and 
also  large  amounts  of  the  money  of  the  company  were  used  by  Gould,  Fisk,  and 
Lane,  by  way  of  compensation  to  agents  employed  by  them  to  promote  the  passage 
of  the  law.  All  these  expenditures  were  fraudulent  breaches  of  trust  on  their 

part (70.)    Gould,  Fisk,    and  Lane  controlled   the  annual   election 

held  for  the  election  of  directors  of 'the  company  in  October,  1869,  by  means 
substantially  similar  to  those  which  they  had  successfully  employed  for  the  like 

purpose   at   the  election   in   October,   1868 These  acts  are   alleged 

to  have  been  the  more  successful  because  of  a  great  proportion  of  the  stock  be- 
ing owned  in  England  and  other  parts  of  Europe,  where  it  was  not  known 
what  was  going  on,  and  that  the  bona  fide  owners  of  stock  in  this  country 
were  discouraged  from  making  any  effort  to  recover  the  control  of  their  prop- 
erty. ...  In  specification  72  it  is  stated  that  Gould,  Fisk,  and  Lane  claimed 
that  three  hundred  and  fifty-five  thousand  votes  were  cast  in  favor  of  the  Board 
of  Directors  then  chosen,  and  in  favor  of  accepting  the  provisions  of  the  act  re- 
ferred to.  It  is  alleged  that  such  votes  were  obtained  by  "voting  on  stock  which 
had  been  sold  and  delivered  by  handing  over  certificates  and  power  in  the  names 
of  the  parties  originally  registered  as  shareholders,  notwithstanding  they  had 
parted  with  and  delivered  such  stock;  voting  upon  stock  borrowed  or  otherwise 
acquired  for  a  very  brief  period,  so  that  the  same  might  stand  in  the  names  of 
Gould,  Fisk,  and  Lane,  or  their  associates  and  confederates,  on  the  day  of  closing 
the  transfei'-books,  although  returned  or  parted  with  immediately  afterward,  under 
the  plan  before  set  forth;  and  voting  upon  proxies  obtained  by  purchase  from 
parties  who  either  owned  the  stock,  or,  as  was  usually  the  case,  had  it  standing 
in  their  names  without  really  owning  it."  .  .  .  (73.)  At  the  election  held  in 
October,  1869,  under  such  circumstances,  Gould,  Fisk,  and  Lane  caused  them- 
selves and  the  following  persons  to  be  elected  directors  of  the  company  for  the 
ensuing  year,  namely:  William  M.  Tweed,  Alexander  S.  Diven,  Justin  D.  White, 
John  Ganson,  0.  W.  Chapman,  Horatio  N.  Otis.  Charles  G.  Sisson,  Abram  Gould, 
Homer  Ramsdell,  Henry  Thompson,  John  Hilton,  Henry  N.  Smith,  N.  R.  Simons, 
and  George  C.  Hall. 


440  HEATH  v.  THE  ERIE  RAILWAY  COMPANY; 

[Immediately  after  the  election,  they  made  the  classification  of  directors,  by 
which  Jay  Gould,  Fisk,  Tweed,  and  Lane  held  for  the  longest  term,  and  which 
expired  in  October,  1874.  By  specification  74,  this  classification  is  alleged  to  be 
illegal,  because  the  power  to  make  the  same  was  given  only  to  the  board  in  exist- 
ence at  the  time  of  the  passage  of  the  act.  .  .  .  Items  75,  76,  77,  set  forth  similar 
acts  to  those  following  the  election  of  1868,  and  the  further  issue  and  sale  of  stock 
of  the  company;  79  and  80,  the  remedial  measures  that  are  asked  for;  and  81 
specifies  the  damage  done  to  the  credit  of  the  stock.] 

"(82.)  Within  the  few  months  last  past,  a  large  number  of  the  shareholders 
of  the  company,  resident  in  Great  Britain,  have  become  awakened  to  the  necessity 
of  action  on  their  part,  in  concert  with  other  bona  fide  stockholders,  in  order  to 
wrest  the  control  of  the  company  from  Gould,  Fisk,  and  Lane,  and  save  it  from 
utter  bankruptcy,  and  it  has  been  ascertained  that  over  four  hundred  and  fifty 
thousand  shares  of  the  stock  of  the  company,  representing  a  capital  of  more  than 
§45,000,000,  are  held  in  Great  Britain."  .  .  .  Specifications  83,  84,  and  85, 
show  the  efforts  made  by  legal  proceedings  to  take  the  company  from  the  control 
of  Gould,  Fisk,  and  Lane,  and  their  associates,  and  allege  that  they  refused  to 
allow  stock  to  be  transferred,  on  pretense  that  the  same  had  been  enjoined. 
"(86.)  The  pretended  suit  on  behalf  of  a  stockholder  in  the  company  against  the 
company,  wherein  such  pretended  injunction  against  transfers  was  obtained,  is  a 
fraudulent  and  collusive  suit  in  the  interest  of  Gould,  Fisk,  and  Lane,  set  on 
foot  and  carried  on  by  them,  and  subject  to  their  control."  Specification  87  al- 
leges that  fraudulent,  suits  were  instituted  by  said  parties  at  the  expense  of  the 
company  for  their  own  benefit.  "(88.)  In  one  instance,  one  Peter  B.  Sweeney, 
a  person  possessing  great  political  influence,  and  whose  aid  in  their  schemes  they 
desired  to  obtain,  was  nominally  appointed  receiver  of  a  large  fund  belonging  to 
the  company,  and  although  no  portion  of  such  money  ever  passed  into  his  hands, 
and  he  never  performed  any  service  as  such  receiver,  he  was,  on  the  discharge  of 
his  receivership,  paid  out  of  the  funds  of  the  company  about  $150,000  in  pre- 
tended compensation  for  his  services  as  such  receiver."  Specifications  89  and 
90  allege  further  breaches  of  trust;  and  91,  breaches  of  trust  in  increasing  the 
capital  stock  and  debts  of  the  company.  "(92.)  As  the  net  results  of  the  two 
years'  management  of  the  company  by  Gould,  Fisk,  and  Lane,  they  have  reduced 
the  net  earnings  of  the  company  to  the  extent  of  more  than  $500.000  a  year, 
while  they  have  increased  the  amount  of  its  share  capital  and  funded  and  float- 
ing debt  from  $51,065,943.23  to  $101,935,710,  or  to  an  extent  of  more  than  $50,- 
000,000."  .  .  .  Specifications  93  to  101  set  forth  at  length  the  grounds  upon 
•which  the  plaintiffs  ask  that  defendants  should  be  removed  from  their  trust  and 
a  receiver  appointed  for  the  company. 

The  bill  prays:  (1.)  That  Gould,  Fisk,  and  Lane,  and  each  of  them,  may  be 
compelled  to  render  an  account  of  all  their  trust  and  management  in  respect  of 
the  property,  funds,  and  affairs  of  the  company,  since  their  election  as  directors 
in  October,  1867,  and  of  all  moneys  and  funds  belonging  to  the  company,  which, 
since  that  time,  have  come  into  the  hands  or  under  the  control  of  them,  or  either 
of  them,  and  of  the  disposition  of  all  such  moneys;  and  also  an  account  in 
respect  of  all  profits,  benefits,  gains,  and  advantages  which,  during  such  period, 
they,  or  either  of  them,  have  derived  to  themselves  from  the  properly,  funds,  or 
credit  of  the  company,  or  at  its  expense,  or  in  anywise  by  reason  of  the  trust 
vested  in  them  as  executive  officers,  execcutive  committee,  or  directors  of  the 
company,  and  in  respect  of  all  losses,  damages,  and  injuries  to  which,  during 


CIRCUIT  COURT,  SOUTHERN  DISTRICT  OF  N.  Y.        441 

Buck  period,  they  have  subjected,  or  caused  to  be  subjected,  the  company,  and  in 
respect  of  all  the  allegations  and  charges  contained  in  the  bill.  (2.)  That  Gould, 
Fisk,  and  Lane  may,  by  the  decree  of  this  court,  be  adjudged  to  make  payment 
and  compensation  to  the  company,  for  the  benefit  of  the  plaintiffs  and  the  other 
bona  fide  shareholders,  to  the  full  extent  of  all  the  profits,  benefits,  gains,  and  ad- 
vantages, and  of  all  such  damages,  losses,  and  injuries.  (3.)  That  by  such  decree, 
Gould,  Fisk,  and  Lane  may  be  ousted  from  all  management,  control,  or  power  in 
or  about  the  property,  funds,  or  affairs  of  the  corporation,  and  enjoined  from  ex- 
ercising any  powers  as  directors,  executive  officers,  or  executive  committee 
thereof,  and  in  any  way  interfering  with  the  property,  funds,  or  affairs  of  the 
company.  (4.)  That  Gould,  Fisk,  and  Lane,  and  the  company,  and  all  its  officers, 
directors,  managers,  and  agents,  may  be  enjoined  and  restrained,  by  this  court, 
from  issuing  any  further  convertible  bonds  of  the  company,  and  from  issuing  any 
further  stock,  or  certificates  of  stock  of  the  company  otherwise  than  upon  sur- 
render and  cancellation  of  certificates  of  existing  valid  stock  of  the  company, 
upon  transfer  of  such  stock  in  the  usual  manner.  (5.)  That,  by  order  of  this 
court,  in  this  suit,  a  receiver  may  be  appointed  to  take  charge  of  the  property, 
funds,  and  affairs  of  the  company,  including  its  railroad  and  appurtenances,  and 
to  manage  and  carry  on  the  same,  under  the  order  and  subject  to  the  direction  of 
this  court,  in  such  manner,  and  for  and  during  such  period,  as,  under  the  cir- 
cumstances, may  seem  proper.  (6.)  That,  pending  this  suit,  Gould,  Fisk,  and 
Lane,  and  the  company,  and  its  officers,  directors,  managers,  and  agents,  may  be 
enjoined  and  restrained  from  issuing  and  delivering  any  bondfe  or  obligations  of 
the  company,  purporting  to  confer  upon  the  holder  thereof  any  right  of  convert- 
ing the  same  into  stock  of  the  company,  or  of  receiving  any  such  stock  in  ex- 
change therefor,  and  from  issuing,  putting  in  circulation,  delivering  or  aiding  in 
giving  currency  to  any  stock  or  certificates  purporting  to  be  for  stock  of  the  com- 
pany, otherwise  than  on  the  surrender  and  cancellation  of  genuine  certificates  of 
existing  shares  of  stock  of  the  company,  now  standing  registered  upon  its  books, 
on  transfer  of  such  stock  in  the  usual  manner.  (7.)  That  the  plaintiffs  may, 
pending  this  suit,  have  such  writ  of  injunction  enjoining  and  restraining  Gould, 
Fisk,  and  Lane,  and  each  of  them,  and  their  attorneys  and  agents,  from  exercising 
any  power  or  authority,  and  from  doing  any  act  as  directors,  or  executive  officers 
or  executive  committee  of  the  company,  and  from  interfering  with  any  of  the 
property,  funds,  or  affairs  of  the  company,  and  from  disposing  of  any  of  such  prop- 
erty or  funds  of  the  company,  and  from  removing,  or  suffering  or  permitting  to 
be  removed,  from  the  offices  of  the  company,  any  of  the  books,  papers,  securities, 
or  funds  of  the  company,  and  from  secreting  or  concealing,  or  suffering  to  be  se- 
creted or  concealed,  any  such  books,  papers,  securities,  or  funds.  (8.)  That  the 
plaintiffs  may  have  such  further  or  such  other  order,  relief,  and  decree  in  the 
premises  as  may  be  equitable. 

William  M.  Evarts  and  Ebenezcr  E.  Hoar,  for  plaintiffs. 
Senj.  R.  Curtis  and  David  Dudley  Field,  for  defendants. 

BLATCHFORD,  J. :  It  is  to  be  noted,  that  the  demurrers  are 
to  the  whole  bill,  and  the  causes  of  demurrer  set  forth  are  set 
forth  as  causes  of  demurrer  to  the  whole  bill,  and  there  is  no 
demurrer  to  any  separate  part  of  the  bill.  The  first  cause  of 


442  HEATH  v.  THE  ERIE  RAILWAY  COMPANY; 

demurrer  set  forth  is  a  general  want  of  equity  in  the  bill,  and 
an  absence  of  title  therein  to  any  of  the  relief  prayed  for.  The 
second  cause  of  demurrer  is  the  want  of  parties,  the  absent  and 
necessary  parties  being  specified. 

Under  the  first  cause  of  demurrer,  the  defendants  advance 
the  propositions :  (1 .)  That  the  bill  states  no  cause  of  action, 
even  in  favor  of  the  plaintiffs  other  than  Burt  5  (2.)  That  Burt 
is  improperly  a  plaintiff,  because  he  is  not  a  stockholder  in  the 
company  ;  (3.)  That  if,  on  that  ground,  the  bill  can  not  be  sus- 
tained on  behalf  of  Burt,  it  can  not  be  sustained  on  behalf  of 
any  of  the  plaintiffs.  The  principal  discussion,  on  the  hearing, 
was  on  the  first  of  these  three  propositions. 

After  considering  at  length  the  right  of  stockholders  to  sus- 
tain the  suit,  in  proceeding  upon  the  same  point,  the  Court 
said :  The  case  of  Hoole  v.  Great  Western  Railway  Company, 
in  1867,  Eng.  Law  Rep.,  3  Ch.  Appeal,  262,  was  a  case  before 
Vice-Chancellor  WOOD.  A  shareholder  in  a  corporation,  on  be- 
half of  himself  and  all  his  co-shareholders  who  were  not  de- 
fendants, filed  a  bill  in  equity  against  the  corporation,  its  direct- 
ors, and  its  secretary,  alleging  that  the  corporation  had  acted 
ultra  vires  in  issuing  certain  shares,  and  was  about  further  to 
act  ultra  vires  in  issuing  certain  other  shares,  and  praying  for  a 
declaration  that  the  corporation  was  not  entitled  to  issue  such 
shares,  and  that  those  which  had  been  issued  be  canceled,  and 
that  the  corporation  be  enjoined  from  paying  dividends  on  those 
which  had  been  issued,  and  that  the  corporation  and  its  directors 
be  enjoined  from  issuing  any  more  of  such  shares.  The  corpo- 
ration demurred  to  the  bill  for  want  of  equity,  and  the  Vice- 
Chancellor  overruled  the  demurrer.  He  also  enjoined  the  cor- 
poration from  issuing  further  shares,  and  gave  liberty  to  apply 
for  an  injunction,  in  case  a  dividend  should  be  declared  on 
shares  which  had  been  already  issued.  The  corporation  ap- 
pealed, and  the  appeal  was  heard  before  the  Lords  Justices, 
holding  the  Court  of  Appeal  in  Chancery.  Lord  Justice  CARNS, 
while  holding  that  the  issuing  of  the  shares  was  believed,  by  all 
the  parties  concerned  in  issuing  them,  to  be  most  advantageous 
to  the  corporation  and  to  every  person  concerned,  and  regret- 
ting that  the  arrangement  did  not  meet  with  the  unanimous 
assent  of  all  the  shareholders,  declared,  that  if  the  issuing 


CIRCUIT  COURT,  SOUTHERN  DISTRICT  OF  N.  Y.         443 

of  the  shares  was  ultra  vires,  and  therefore  illegal,  any  mem- 
ber of  the  corporation  might  dissent  from  it,  and  had  a  right 
to  appeal  to  a  court  of  equity  to  be  protected  against  its  effects. 
On  the  question  of  power,  he  held  that  the  issuing  of  the  shares 
was  ultra  vires,  that  the  equity  of  the  bill  was  clear,  and  that 
the  order  for  the  injunction,  as  regarded  equity,  was  entirely 
correct.  He  also  declared,  that  he  had  a  very  strong  opinion 
that  any  corporator,  or  member  of  a  company,  may  maintain  a 
bill  against  the  corporation  and  the  executive,  to  restrain  them 
from  doing  an  act  which  is  ultra  vires,  and  therefore  illegal, 
without  making  the  bill  a  bill  on  behalf  of  other  shareholders. 
Viewing  the  prayer  of  the  bill  in  regard  to  canceling  the  shares 
issued,  not  as  praying  for  relief  affecting  the  individuals  holding 
the  shares,  as  purchasers  or  otherwise,  but  as  a  request  to  the 
court  to  order  the  executive  of  the  company  to  take  steps,  un- 
der their  own  responsibility  and  at  their  own  expense,  to  cancel 
or  get  in  the  stock  improperly  issued,  he  held  that,  in  regard  to 
the  prayer  for  an  injunction  against  paying  dividends  on  the 
shares  already  issued,  the  holders  of  such  shares  were  sufficiently 
represented  in  the  suit  by  one  of  the  defendants,  who  was  a  di- 
rector, and  held  some  of  such  shares.  He  sustained  the  bill,  and 
the  order  for  the  injunction.  Lord  Justice  ROLT,  in  his  opinion, 
said  it  was  possible  and  very  probable,  that  the  arrangement 
proposed  by  the  issuing  of  the  shares  was  very  beneficial;  that 
if  it  were  within  the  power  of  the  corporation,  the  decision  of 
the  governing  body  might,  upon  the  principle  adopted  by  the 
court,  in  Mozley  v.  Alston,  I  Phillips,  790,  and  Foss  v.  Harbot- 
tle,  2  Haire,  461,  be  held  to  govern;  but  that,  if  the  scheme 
proposed  was  altogether  beyond  their  power,  the  court  had 
nothing  to  do  with  the  merits,  but  had  only  to  see  that  the  cor- 
poration did  not  exceed  its  powers.  He  held,  that  the  scheme 
was  beyond  the  powers  of  the  corporation,  and  that  the  order 
overruling  the  demurrer,  and  the  order  granting  the  injunction, 
were  right.  He  added :  "  If  the  act  complained  of  is  illegal, 
as  I  think  it  is,  I  do  not  at  present  see  why  any  single  share- 
holder should  not  be  at  liberty  to  file  a  bill  to  restrain  the  com- 
pany from  exceeding  their  powers.  .  .  .If  one  individual 
having  an  interest  complains  of  an  act  of  the  whole  company 
as  being  illegal,  there  is,  as  a  general  rule,  no  necessity  for  any 


444  HEATH  v.  THE  ERIE  RAILWAY  COMPANY; 

other  shareholders  being  parties."  (See,  a\so,JBonham  v.  Metro- 
politan Railway  Co.,  in  1868,  Eng.  Law  Rep.,  3  Ch.  Appeals, 
337,  before  Vice-Chancellor  WOOD,  and,  on  appeal,  before  the 
Lord  Chancellor  CHELMSFOIID.) 

The  case  of  Foss  v.  Harbottle,  and  Mozley  v.  Alston,  were 
cited  and  relied 'on  by  the  defendants  in  the  case  of  Gregory  v. 
Patchett,  in  1864,  33  Beavan,  595,  in  which  case  the  Master  of 
the  Rolls,  Sir  JOHN  ROMILLY,  says  that  he  has  examined  the  va- 
rious cases  on  the  subject,  and  the  result  of  them  is,  that  in 
matters  strictly  relating  to  the  internal  management  of  a  com- 
pany, even  though  the  court  should  come  to  the  conclusion  that 
the  course  adopted  is  not  warranted  by  the  terms  of  the  charter, 
the  court  will  not  interfere,  even  though  the  minority  should 
have  summoned  a  meeting  of  all  the  shareholders,  and  the  ma- 
jority should  have  persisted  in  the  course  complained  of  (the 
general  body  of  the  shareholders,  at  meetings  duly  convened  for 
the  purpose,  being  the  ultimate  governing  body) ;  but  that,  if 
the  measures  adopted  are  plainly  beyond  the  powers  of  the  com- 
pany, and  are  inconsistent  with  the  objects  for  which  the  com- 
pany was  constituted,  the  court  will,  at  the  instance  of  the 
minority,  interpose  to  prevent  the  performance  of  the  act  com- 
plained of,  and  it  will  do  so  whether  an  appeal  has  or  has  not 
been  made  by  the  minority  to  the  shareholders  generally. 

The  following  cases  in  courts  in  the  United  States  were  cited 
and  relied  on  by  the  defendants:  Hersey  v.  Veazie,  24  Maine, 
9 ;  Dodge  v.  Woolsey,  18  Howard,  331 ;  Allen  v.  Curtis,  26 
Connecticut,  456 ;  Bronson  v.  La  Crosse  Railroad  Co.,  2  Wal- 
lace, 283;  Memphis  City  v.  Dean,  8  Wallace,  64;  and  Sam- 
uels v.  Express  Co.,  M'Cahon's  Rep.,  214. 

Judge  BLATCHFORD  thereupon  proceeded  to  examine  each 
one  of  the  cases  referred  to,  and  continued :  In  the  bill  before 
us  there  are  many  acts  set  forth  which  are  ultra  vires.  On  the 
allegations  of  the  bill,  it  would  appear  that  all  issues  of  stock 
by  the  company,  other  than  such  as  were  specifically  authorized 
or  approved  by  the  acts  of  April  4,  1860,  April  2,  1861,  March 
28,  1862,  May  4,  1864,  and  April  21,  1868,  were  unauthorized 
and  illegal,  and  that  no  authority  for  the  issuing  of  any  stock  by 
the  company  can  be  derived  from  the  tenth  subdivision  of  the 
twenty-eighth  section  of  the  General  Railroad  Act  of  April  2, 


CIRCUIT  COURT,  SOUTHERN  DISTRICT  OF  N.  Y.        445 

1850.  Besides  the  issue  of  stock  not  covered  by  the  acts  of 
1860,  1861,  1862,  1864,  and  1868,  there  are  in  the  bill  many 
acts  charged  in  respect  to  the  use  and  application  of  the  corpo- 
rate funds  of  the  corporation,  which  were  ultra  vires  of  the  cor- 
poration, and  breaches  of  trust  on  the  part  of  Gould,  Fisk,  and 
Lane,  who  constituted  a  majority  of  the  Executive  Committee, 
to  which  committee,  according  to  the  bill,  the  administration  of 
the  affairs  arid  funds  of  the  company  appears  to  have  been  wholly 
given  up  by  the  Board  of  Directors.  The  bill,  among  other 
things,  prays  for  preventive  relief,  by  injunction,  to  restrain  the 
corporation  from  issuing  any  new  certificates  of  stock,  except 
on  the  surrender  and  cancellation  of  certificates  for  existing 
valid  stock,  on  a  regular  transfer  thereof,  and  to  restrain  Gould, 
Fisk,  and  Lane,  who  have  committed  such  breaches  of  trust, 
from  exercising  any  further  powers  as  directors,  executive  offi- 
cers, or  Executive  Committee  of  the  company,  and  from  inter- 
fering with  or  disposing  of  its  property,  funds,  or  affairs. 

Now,  so  far  as  the  bill  sets  out  acts  ultra  vires,  in  issuing 
stock,  and  breaches  of  trust,  which  are  frauds  on  the  stockhold- 
ers, such  acts  and  breaches  of  trust  are  beyond  the  power  of 
the  corporation  or  its  directors  to  affirm,  or  sanction,  or  make 
good  ;  and,  in  such  case,  the  authorities  agree  that  the  reason 
of  the  rule  for  an  application  to  the  corporation,  or  its  Board  of 
Directors,  to  bring  the  suit,  does  not  exist.  Such  reason  is,  that 
while  the  stockholder  is  prosecuting  his  suit,  the  corporation, 
through  its  Board  of  Directors,  may  affirm  and  make  good  the 
acts  complained  of.  But  the  rule  ceases  when  the  reason  ceases. 
The  bill  is,  therefore,  clearly  maintainable,  in  respect  to  the  acts 
ultra  vires  which  it  sets  forth,  and  the  preventive  relief  it  seeks, 
founded  thereon,  without  reference  to  any  thing  else  contained 
in  it  (a). 

(a)  Ilazlehurst  v.  Savannah,  Griffin  and  N.  Alabama  Railroad  Co.,  43  Georgia,  13: 
It  is  not  ultra  vires  for  a  railroad  company,  by  its  directors,  to  contract  to  issue 
to  contractors  for  the  completion  of  the  road  preferred  stock  in  the  company,  in 
payment  for  work  to  be  done,  and  to  agree  that  a  majority  of  the  directors  shall 
be  the  holders  of  a  certain  number  of  shares  of  said  preferred  stock;  provided  the 
number  of  shares  agreed  to  be  issued  does  not  make  the  whole  amount  of  shares 
greater  than  the  capital  stock  authorized  by  the  charter. 

The  Macon  and  Brunswick  Railroad  Company  has  no  power,  under  its 
charter,  to  purchase  stock  in  another  railroad,  or  to  contract  with  others,  for  a 
consideration,  to  purchase  the  same,  and  run  it  in  the  control  of  said  other  road 


446  HEATH  v.  THE  ERIE   RAILWAY  COMPANY; 

It  is  a  rule  of  equity  pleading,  Story's  Eq.  PI.  463,  that,  if 
a  demurrer  covers  the  whole  bill,  when  it  is  good  to  a  part  only, 
it  will  be  overruled,  Livingston  v.  Story,  9  Peters,  632,  658. 
The  demurrers,  in  this  case,  cover  the  whole  bill.  The  first 
cause  of  demurrer  assigned  in  each,  the  want  of  equity,  or,  that 
the  plaintiffs  have  not  stated  such  a  case  as  entitles  them  to  any 
such  relief  as  they  seek,  is  a  cause  of  demurrer  to  the  whole 
bill,  and  to  each  and  every  part  of  it.  The  demurrer,  for  want 
of  equity,  must,  therefore,  be  overruled,  as  the  bill  is,  at  least, 
good  in  part.  The  thirty-second  of  the  Rules  in  Equity,  pre- 
scribed by  the  Supreme  Court,  allows  a  defendant  to  demur  to 
the  Avhole  bill,  or  to  a  part  of  it. 

But  I  think  the  bill  states  a  case  which  brings  it  within  the 
settled  principles  as  to  allowing  a  bill  by  a  stockholder,  where 
the  corporation  is  under  the  control  of  the  defendants  who  must 
be  sued,  and  an  excuse  is  given  for  the  bringing  of  the  suit  by 
the  stockholder,  which  is  equivalent  to  a  refusal  by  the  direct- 
ors, on  request,  to  bring  the  suit. 

The  Court,  after  stating  the  circumstances  attending  the 
election  of  the  Boards  of  Directors  for  1868  and  1869,  proceed 
as  follows:  It  was  during  the  period  between  October,  1868, 
and  October,  1869,  that  the  share  capital  of  the  company  was 
increased  by  over  $32,000,000.  Of  the  seventeen  directors 
elected  in  October,  1869,  eight  (excluding  Gould,  Fisk,  and 
Lane)  are  persons  who  thus  wholly  neglected  their  duties,  and 
abnegated  their  functions,  during  the  year  ending  in  October, 
1869.  As  to  them,  and  as  to  their  six  new  associates,  brought 
in  in  October,  1869,  the  bill  alleges  that,  as  a  Board,  they  pos- 
sess no  independent  force  for  controlling  Gould,  Fisk,  and  Lane ; 
that  Gould,  Fisk,  and  Lane  have  practically  the  absolute  and 
unchecked  control  of  the  corporation,  and  its  funds,  property, 
and  affairs ;  that  Tweed  is  in  full  accord  with  them  in  their 
schemes  for  private  gain  at  the  expense  of  the  company,  and 
has  been,  and  is,  personally  interested  in  many  of  such  schemes  ; 
that  Smith  was  a  copartner  with  Gould  in  said  firm  of  Smith, 
Gould,  Martin  &  Co. ;  that  Hilton,  White,  Otis,  and  Hall  are 
salaried  employees  of  the  company,  holding  their  offices  at  the 

for  the  benefit  of  the  Macon  and  Brunswick  Railroad.     Such  a  contract  is  ultra 
virei,     .     .     .     and  any  stockholder  may  come  into  equity  to  prevent  it. 


CIRCUIT  COURT,  SOUTHERN  DISTRICT  OF  N.   Y.        447 

pleasure  of  Gould,  Fisk,  and  Lane,  or  of  Gould  alone,  and  have 
only  a  nominal  and  trifling  interest,  if  any,  as  shareholders  in 
the  company ;  and  that  Simons  is  in  a  substantially  like  relation 
with  ( Gould,  Fisk,  and  Lane,  being  a  salaried  employee  of  the 
Narraganset  Steamship  Company,  which  is  under  the  manage- 
ment and  control  of  Gould,  Fisk,  and  Lane.  Gould,  Fisk,  Lane, 
Tweed,  Hilton,  White,  Otis,  Hall,  and  Simons  constitute  a  ma- 
jority of  the  seventeen  directors.  The  bill  also  avers,  that  the 
independent  action  of  some  of  the  other  eight  directors  is 
compromised  by  reason  of  their  being  under  some  pledge  to 
support  the  policy  of  Gould,  or  resign,  or  they  are  in  too  small 
a  minority  to  interpose  any  substantial  check  to  the  operations 
of  Gould,  Fisk,  and  Lane,  supported,  as  they  are,  by  an  over- 
whelming majority  of  the  Board  in  their  interest,  and  that  such 
other  directors  are  in  such  relations  with  Gould,  Fisk,  and  Lane, 
as  have  prevented,  and  will  prevent,  them  from,  in  any  way, 
causing  to  be  exerted  the  corporate  power  of  the  company  to 
bring  Gould,  Fisk,  and  Lane  to  account.  The  bill  sums  up  its 
conclusion  from  the  facts  alleged  in  this  regard,  by  averring  that 
the  rights  and  equities,  claims  and  demands,  in  favor  of  the 
company,  which  are  set  forth  in  the  bill,  can  not  be  enforced  by 
suits  brought  in  the  name  and  on  behalf  of  the  company,  for 
the  reason  that  the  control  of  the  company  is  wholly  in  the 
hands  of  Gould,  Fisk,  and  Lane,  and  the  plaintiffs  are  wholly 
unable  to  procure  the  bringing  of  a  suit  in  the  name  of  the 
company  as  plaintiffs  against  them.  The  allegations  of  the  bill 
show  satisfactorily  that  the  company  is  under  the  actual  potential 
control  of  the  defendants  Gould,  Fisk,  and  Lane,  within  the  rule 
of  equity  jurisprudence  before  referred  to,  so  that  it  would  be  a 
mockery  to  require  or  permit  a  suit  against  them  to  be  brought 
and  prosecuted,  under  their  management,  to  obtain  the  relief 
sought  by  this  bill.  These  allegations  are  admitted  by  the  com- 
pany, which  speaks  for  all  the  directors,  by  the  demurrer  which 
it  has  interposed.  It  is  urged,  by  the  counsel  for  the  defend- 
ants, that  the  allegation  of  the  bill,  that  the  Board  of  Directors, 
elected  in  October,  1869,  is  so  constituted  that  it  possesses  no 
independent  force  for  controlling  Gould,  Fisk,  and  Lane,  is  a 
simple  impossibility,  for  the  reason  that  the  fourteen  directors 
do  possess  an  independent  force  to  control  the  three.  But  the 


448  HEATH  v.  THE  ERIE  RAILWAY  COMPANY; 

facts  set  forth  in  the  bill  show  that  this  is  no  impossibility.  An 
absence  of  control  is  shown,  facts  showing  dependence  are 
shown,  a  failure  to  exhibit  force  is  shown,  a  surrender  of  the 
entire  corporation  to  Gould,  Fisk,  and  Lane  is  shown,  and  a 
moral  paralysis  on  the  part  of  the  fourteen  directors  is  shown, 
which  warrants  the  statement  in  the  bill.  If  there  ever  was  a 
case  which  called  for  the  remedial  power  of  a  court  of  equity  to 
be  exerted,  at  the  suit  of  a  stockholder  for  the  benefit  of  him- 
self and  of  his  co-stockholders  and  of  the  company,  to  take  cog- 
nizance of  fraudulent  breaches  of  trust  on  the  part  of  the  con- 
trolling directors,  this  is  such  a  case;  and  it  is  a  case  where 
sufficient  ground  for  the  interposition  is  shown,  without  requir- 
ing a  direct  request  to  the  corporation  to  prosecute,  and  its 
refusal. 

Burt  is  not  a  stockholder,  and  is  improperly  joined  as  a  plain- 
tiff. As  the  suit  is  a  joint  one,  his  want  of  interest  is  a  good 
ground  of  demurrer  to  the  whole  bill,  Story's  Eq.  PL  sec.  509. 
The  objection  is  one  to  the  substance  of  the  bill.  But  the  plain- 
tiffs may,  if  they  desire,  under  Rule  35  of  the  Rules  in  Equity 
prescribed  by  the  Supreme  Court,  amend  their  bill,  on  payment 
of  costs,  by  striking  out  the  name  of  Burt  as  a  plaintiff,  and  the 
allegations  of  the  bill  in  regard  to  his  claim  to  stock. 

It  is  set  forth  as  a  ground  of  demurrer  to  the  bill,  that  El- 
dridge,  Thompson,  Underwood,  Bardwell,  Jordan,  and  Whitney, 
are  necessary  parties  to  the  bill,  as  being  stated  therein  to  have 
been  concerned  in  the  illegal  and  fraudulent  acts  in  respect  of 
which  the  bill  asks  relief.  These  six  persons  were  six  of  the 
directors  from  October,  1867,  to  October,  1868.  This  objection, 
if  of  avail,  would  apply  equally  to  Evans  and  Gregory,  who 
were  directors  during  the  same  period,  and  to  Groves,  Sweeney, 
Miller,  and  G.  M.  Diven,  who  were  directors  from  October,  1868, 
to  October,  1869,  for,  while  there  are  allegations  in  the  bill,  of 
complicity  in  breaches  of  trust  and  in  fraudulent  acts,  that  are 
applicable  to  the  six  directors  so  specified  in  the  causes  of  de- 
murrer, there  are  other  such  allegations  that  are  applicable,  some 
of  them  to  the  first  two,  and  the  others  to  the  last  four,  of  the 
last  named  six  directors,  who  are  not  specified  in  the  causes  of 
demurrer  as  necessary  parties.  I  exclude  Work,  Davis,  and 
Skidmore,  because  of  the  allegations  in  the  bill  in  regard  to  them. 


CIRCUIT   COURT,  SOUTHERN  DISTRICT  OF  N.  Y.        449 

But  it  is  not  necessary  to  make  any  of  such  twelve  persons  parties. 
The  well-settled  rule  is,  that,  if  there  are  several  trustees  who 
are  all  implicated  in  a  common  breach  of  trust,  for  which  the 
cestni  que  trust  seeks  relief  in  equity,  he  may  bring  his  suit 
against  all  of  them,  or  against  any  one  of  them  separately,  at  his 
election,  the  tort  being  treated  as  several  as  well  as  joint,  Story's 
Eq.  PI.  sec.  213  ;  Cunningham  v.  Pett,  5  Paige,  G07,  before  cited. 

Nor  is  it  necessary  that  the  Boston,  Hartford,  and  Erie  Rail- 
road Company,  or  Schell,  or  Vanderbilt,  or  the  Narraganset 
Steamship  Company,  should  be  parties  to  the  bill.  No  relief  is 
prayed  for  against  them.  The  transactions  with  them  by  Gould, 
Fisk,  and  Lane,  which  are  complained  of,  are  set  forth,  but  the 
bill  seeks  to  charge  Gould,  Fisk,  and  Lane  as  tort-feasors.  If 
the  parties  named  have  been  in  collusion  with  Gould,  Fisk,  and 
Lane,  in  wrongfully  obtaining  the  funds  of  the  company,  Gould, 
Fisk,  and  Lane  have  no  right  of  contribution  over  against  such 
parties,  and,  therefore,  can  not  require  them  to  be  made  parties 
to  the  suit.  As  to  the  company,  the  tort  of  each  wrong-doer 
against  it  is  several,  and  neither  in  a  suit  by  it  nor  by  its  stock- 
holders is  every  one  of  the  wrong-doers  a  necessary  party,  be- 
cause some  one  wrong-doer  is  a  proper  party.  The  doctrine  above 
referred  to  in  regard  to  several  trustees  implicated  in  a  common 
breach  of  trust,  applies  equally  to  any  wrong-doer  confederated 
with  a  fraudulent  trustee. 

It  is  alleged,  as  a  cause  of  demurrer  to  the  whole  bill,  that  the 
fourteen  persons  other  than  Gould,  Fisk,  and  Lane,  who  were, 
with  them,  elected  directors  of  the  company  in  October,  1869, 
are  necessary  parties  to  the  bill,  inasmuch  as  the  bill  prays  to 
have  the  classification  of  directors  of  October,  18G9,  set  aside, 
and  thus  shorten  the  term  of  such  fourteen  persons,  who  appear 
by  the  bill  still  to  be  directors  of  the  company.  Even  if  such 
fourteen  persons  be  necessary  parties  in  respect  of  the  relief 
prayed  in  regard  to  such  classification,  and  even  if  a  demurrer 
to  such  relief  would  be  maintainable  for  want  of  such  paiiies, 
yet  the  demurrer  in  this  particular  is  too  general  and  must  be 
overruled,  because  it  covers  the  whole  bill,  and  should  have  been 
a  demurrer  only  to  the  relief  prayed  in  regard  to  such  classifi- 
cation, Story's  Eq.  PI.  sec.  443;  Livingston  v.  Story,  9  Peters, 
G32,  658. 

29 


Uf  3  C  -450  -  4-5^  SHORE  v.  WILSON, 


The  objection  that  such  fourteen  persons  ought  to  be  made 
parties,  as  appearing  to  have  been  directors  when  the  bill  was 
filed,  for  the  reason  that  the  bill  asks  for  an  injunction  against 
the  corporation,  and  for  a  receiver  of  the  corporation,  is  not  well 
taken.  The  relief  so  asked  is  against  the  corporation.  If  such 
fourteen  persons  were  made  parties,  they  would  be  merely  nom- 
inal parties  and  not  real  parties,  in  respect  to  any  relief  that  is 
asked  against  the  corporation  ;  and  no  relief  is  asked  against 
them,  except  in  respect  to  the  matter  of  classification,  which  has 
already  been  disposed  of.  This  question  was  fully  considered  in 
the  case  of  Hatch  v.  The  Chicago,  Rock  Island  and  Pacific  Rail- 
road Co.  6  Blatchf.  C.  C.  R.  105,  114  to  11G. 

The  views  already  stated  dispose  of  the  objection  that  Tweed 
is  not  a  party  to  the  bill.  Though  he  is  charged  to  have  been 
in  complicity  with  Gould,  Fisk,  and  Lane,  relief  is  not  asked 
against  him.  It  results,  therefore,  that  the  demurrers  are  over- 
ruled, and  the  bill  is  sustained  in  all  particulars,  except  as  to  the 
joining  of  Burt  as  a  party  plaintiff,  as  to  which  the  plaintiffs 
may  amend,  as  before  stated,  on  payment  of  costs.  . 


SHORE  v.  WILSON. — LADY  HEWLEY'S  CHARITIES. 

[Decided  in  the  House  of  Lords  in  1842,  Lord  COTTENHAM  delivering 
the  opinion,  in  which  Lord  BROUGHAM  concurred.  Reported  in  9  Clarke 
&  Finnelly's  Reports,  355.] 

Trusts  for  Charities — Protestant  Dissenters — Unitarians — Construction  of  Deeds — 
Extrinsic  Evidence. — By  deeds  executed  in  1704,  Lady  Hewley  conveyed  es- 
tates to  trustees,  upon  trust  to  pay  out  of  the  rents  such  sums,  yearly  or 
otherwise,  to  such  poor  and  godly  preachers  for  the  time  being  of  Christ's 
holy  Gospel,  and  to  such  poor  and  godly  widows  for  the  time  being  of  poor 
and  godly  preachers  of  Christ's  holy  Gospel,  as  the  trustees  for  the  time 
being  should  think  fit;  and  to  dispose  of  such  sums,  and  in  such  manner, 
for  promoting  the  preaching  of  Christ's  holy  Gospel  in  such  poor  places  as 
the  trustees  for  the  time  being  should  think  fit;  and  also  to  dispose  of  such 
Bums  as  exhibitions  for  educating  such  young  men  designed  for  the  minis- 
try of  Christ's  holy  Gospel  as  the  trustees  for  the  time  being  should  approve 
and  think  fit;  and  to  dispose  of  the  remainder  of  the  said  rents  in  relieving 
such  godly  persons  in  distress,  being  fit  objects  of  her  and  the  trustees' 
charity,  as  the  trustees  for  the  time  being  should  think  fit;  and  she  directed, 


IN  THE  HOUSE  OF  LORDS.  451 

that  when  any  one  of  the  trustees  should  die,  the  survivors  should  elect  in 
his  place  such  a  person  as  they  in  their  judgments  and  consciences  should 
think  fit  to  be  a  trustee. 

By  other  deeds,  executed  in  1707,  Lady  Hewley  conveyed  other  estates  to  the 
same  trustees,  partly  for  the  support  of  poor  old  people  in  an  alms-house,  for 
the  management  of  which  she  appointed  other  trustees ;  and,  after  directing 
that  the  trustees  and  managers  should  observe  the  rules  which  she  should 
leave  for  the  selection  and  government  of  the  poor  people  therein,  she  ordered 
the  residue  of  the  rents  to  be  applied  upon  trusts,  which  were  the  same  as 
those  contained  in  the  deeds  of  1704.  By  the  rules  left  by  her  for  the  selec- 
tion of  the  old  people  for  the  alms-house,  she  ordered  that  none  be  admitted 
but  such  as  should  be  poor  and  piously  disposed,  and  of  the  Protestant  relig- 
ion, and  able  to  repeat  by  heart  the  Lord's  Prayer,  the  Creed,  the  Ten  Com- 
mandments, and  Bowles's  Catechism. 

At  the  dates  of  the  deeds,  all  religious  sects  tolerated  by  law  believed  in  the 
Trinity;  but  in  the  course  of  time  the  estates  became  vested  in  trustees  of 
whom  the  majority  were  Unitarians,  and  they  applied  the  rents  for  the  ben- 
efit of  Unitarians;  and  that  sect  became  tolerated  by  law.  Held,  by  the 
Lords — affirming  judgments  of  the  Court  of  Chancery,  on  an  information 
filed  in  1830 — that  neither  Unitarians  nor  members  of  the  Church  of  Eng- 
land, but  Protestant  Dissenters  only,  are  entitled  to  the  benefit  of  the  char- 
ities, and  that  all  the  trustees  were  properly  removed,  as  all  concurred  in  the 
misapplication  of  the  charity  funds;  semble,  that  Unitarians,  in  the  present 
state  of  the  law,  are  capable  of  partaking  of  such  charities,  founded  for 
their  benefit. 

Held,  that  for  the  purpose  of  determining  the  objects  of  Lady  Hewley's  charity, 
under  the  terms,  "godly  preachers  of  Christ's  holy  Gospel,"  "godly  persons," 
and  the  other  descriptions  contained  in  her  deeds,  extrinsic  evidence  is  ad- 
missible to  show  the  existence  of  a  religious  party  by  whom  that  phraseology 
was  used,  and  the  manner  in  which  it  was  used,  and  that  she  was  a  member 
of  that  party;  semble,  that  in  putting  a  construction  on  the  deed  of  1704,  the 
provisions  of  the  deeds  of  1707  are  not  to  be  referred  to. 

A  decree  declaring,  in  the  terms  of  a  prayer  of  a  charity  information,  that  cer- 
tain persons  are  not  entitled  thei-eto,  is  not  defective  for  not  also  declaring 
who  are  entitled. 

THE  suit  in  which  this  appeal  arose  was  instituted  by  an  in- 
formation filed  in  1830,  in  the  name  of  the  Attorney-General, 
for  the  purpose  of  administering  certain  charities  founded  in  the 
years  1704  and  1707,  by  Dame  Sarah  Hewley,  by  distinct  sets 
of  deeds,  and  placed  under  the  direction  of  distinct  sets  of  trust- 
ees. The  question  for  decision  in  the  appeal  turned  upon  the 
construction  of  the  foundation  deeds,  and  on  the  admissibility 
of  certain  evidence  given  to  show  the  intentions  of  the  foundress. 

The  history  of  the  charity  is  briefly  this :  Lady  Hewley,  the 
foundress,  was,  on  her  husband's  death,  left  with  a  very  ample 
fortune.  She  was  a  pious  lady,  and  took  a  deep  interest  in  the 


452  SHORE  v.  WILSON, 


fate  of  the  ejected  ministers  on  St.  Bartholomew's  Day,  1662,  un- 
der the  Act  of  Uniformity,  who  could  not  by  law,  until  after  the 
Revolution,  and  the  Act  of  Toleration  was  passed,  celebrate  the 
rites  of  religion  according  to  their  consciences.  Lady  Hewley 
bountifully  assisted  and  supported  a  considerable  number  of 
them,  at  a  time  when  the  celebration  of  the  rites  of  religion, 
which  they  professed,  was  contrary  to  law.  She  did  not  with- 
draw her  bounty  from  the  non-conformist  clergy  after  the  Revo- 
lution ;  and  after  the  Act  of  Toleration  had  passed,  she,  in  the 
years  1704  and  1707,  executed  deeds,  by  which  a  large  portion 
of  her  fortune  was  conveyed  to  trustees  for  religious  and  char- 
itable purposes.  These  deeds  were  prepared  by  the  advice  of 
counsel,  skillfully  framed,  and  expressing  in  definite  and  distinct 
terms  the  objects  that  she  had  in  view. 

The  relators  offered  evidence  to  show  that  Latly  Hewley  and 
the  original  trustees  of  the  charities,  and  Mr.  Bowles,  whose 
Catechism  she  desired  to  be  used  in  the  alms-house,  were  Trin- 
itarian Dissenters,  believing  in  the  divinity  of  the  person  of 
Jesus  Christ,  and  in  the  doctrines  of  Original  Sin  and  the 
Atonement.  And  to  prove  the  misapplication  of  the  charity 
funds,  it  was  shown,  from  a  list  given  in  by  the  trustees,  that 
out  of  two  hundred  and  thirty-seven  persons  receiving  aid  from 
the  charity  funds  at  the  time  when  the  information  was  filed, 
thirty-eight  were  by  reputation  Unitarians  in  doctrinal  opinions, 
and  most  of  them  preached  in  old  Presbyterian  chapels,'  the 
ministers  of  which  always  received  aid  from  the  charity. 

The  case  was  heard  by  the  Vice-Chancellor  in  1833.  He 
adjudged  and  decreed  that  ministers  or  preachers  of  what  is 
commonly  called  Unitarian  belief  and  doctrine,  and  their  widows 
and  members  of  their  congregations,  and  that  persons  of  what  is 
commonly  called  Unitarian  belief  and  doctrine,  are  not  fit  objects 
of,  and  are  not  entitled  to  partake  of  the  charities  of  Dame 
Sarah  Hewley  ;  and  for  this  misapplication  of  the  trust  fund  in 
distributing  the  charity  to  such  persons,  the  defendants,  the 
trustees,  were  removed,  and  measures  taken  for  the  appointment 
of  others. 

An  appeal  from  the  Vice-Chancellor's  decree  was  taken  to 
the  High  Court  of  Chancery,  and  argued  for  four  days  before 
Lord  Chancellor  BROUGHAM,  but  he  resigned  the  great  seal 


IN  THE  HOUSE  OF  LORDS.  453 

before  the  arguments  were  finished.  In  1835  it  was  argued  de 
novo  before  Lord  Chancellor  LYNDHURST,  assisted  by  Mr.  Justice 
PATTESON  and  Mr.  Baron  ALDERSON.  These  learned  judges 
gave  a  lengthy  joint  opinion;  and  in  1836,  after  hearing  it,  the 
Lord  Chancellor  pronounced  his  judgment,  concurring  with 
them,  affirming  the  Vice-Chancellor's  decree,  and  dismissing 
the  appeal. 

From  this  decree  and  order,  the  trustees  appealed  to  the 
House  of  Lords,  and  the  appeal  came  to  be  heard  in  1839,  in  the 
presence  of  the  learned  law  judges,  to  wit :  Justices  MAULE, 
ERSKINE,  COLERIDGE,  and  WILLIAMS,  Barons  GURNET  and 
PARKE,  and  Lord  Chief  Justice  TINDAL,  who  were  summoned 
to  attend  the  sittings  of  the  House  of  Lords  for  that  purpose. 

The  case  was  argued  at  length  by  Attorney-General  Sir  J. 
Campbell,  and  the  Solicitor-General,  for  the  appellants.  On  the 
part  of  the  respondents,  by  Mr.  Knight  Bruce  and  Mr.  KindersUy. 

The  questions  of  law  submitted  to  the  judges  for  opinions 
thereon,  were  these : 

1.  Whether  the  extrinsic  evidence  introduced  in  this  cause,  or  what  part  of 
it,  is  admissible  for  the  purpose  of  determining  who  are  entitled,  under  the  terms 
"godly  preachers  of  Christ's  holy  Gospel,"  "godly  persons,"  and  the  other  de- 
scriptions contained  in  the  deeds  of  1704  and  1707,  to  the  benefit  of  Lady  Hew- 
ley's  bounty? 

2.  If  such  evidence  be  admissible,  what  description  of  ministers,  congrega- 
tions,  and   poor  persons,   are  the   proper  objects  of   the  trusts   of  those   deed's 
respectively  ? 

3.  Whether,  in  putting  a  construction  upon  the  deed  of  1704,  any  and  which 
of  the  provisions  of  the  deed  of  1707  may  be  referred  to? 

4.  Whether,  upon  the  true  construction  of  the  deed   of  1704,  ministers  or 
preachers  of  what  is  commonly  called  Unitarian  belief  and  doctrine,  and  their 
widows  and  members  of  their  congregations,  and  persons  of  what  are  commonly 
called  Unitarian   belief  and  doctrine,  are  excluded   from   being  objects  of  the 
charities  of  that  deed? 

5.  The  same  question  as  to  the  deed  of  1707  ? 

6.  AVhether   such   ministers,   preachers,   widows,  and   persons,  are,    in   the 
present  state  of  the  law,  incapable  of  partaking  of  such  charities,  or  any  and 
which  of  them  ? 

The  judges  attended  the  session  of  the  House  of  Lords,  in 
May,  1842,  and  severally  delivered  lengthened  opinions.  Jus- 
tice MAULE,  alone,  was  of  opinion  that  the  deeree  appealed  from 
should  be  reversed. 


454  SHORE  v.  WILSON, 


[This  case  was  one  of  the  most  elaborate  ever  brought  to  the  House  of  Lords 
for  final  decision.  The  report  in  9  Clark  &Finnelly,  355,  gives  a  full  abstract  of 
the  pleadings  and  testimony,  and  the  opinions  and  judgments  at  length.  Alto- 
gether, it  is  one  of  the  most  interesting  cases  ever  reported;  and  great  practical 
benefits  are  to  be  derived  from  the  thorough  examinations  made  therein  of  the 
points  of  trusts  involved.  To  give  here  a  more  enlarged  abstract  of  the  case 
would  exceed  our  space;  but  the  reader  is  referred  to  the  original  report,  occupy- 
ing two  hundred  and  twenty-seven  pages.  The  opinion  of  Lord  COTTENHAM, 
which  follows,  practically  closed  this  extended  litigation.] 

Lord  COTTENHAM,  on  August  5,  1842,  moved  the  judgment 
of  the  House,  as  follows :  My  Lords,  the  opinions  which  have 
been  delivered  by  the  learned  judges  have  so  far  exhausted  this 
case  in  all  the  most  material  parts  of  it,  that  I  do  not  deem  it 
necessary  to  enter  at  large  into  the  very  interesting  and  impor- 
tant matters  which  were  discussed  at  the  bar. 

The  principal  object  of  the  suit  was  to  have  it  declared  that 
ministers  or  preachers  of  what  is  commonly  called  Unitarian  be- 
lief aYid  doctrine,  and  their  widows,  and  members  of  their  con- 
gregations, or  persons  of  what  is  commonly  called  Unitarian 
belief  and  doctrine,  are  not  fit  objects  of  the  charity.  The 
decree  appealed  from  established  the  affirmative  of  that  propo- 
sition, and  of  the  seven  judges  who  attended  the  hearing  at  the 
bar  of  this  House,  six  concurred  in  it.  I  can  not  suppose  that 
your  Lordships  will  think  that  there  is  ground  for  differing  from 
this  opinion ;  and  if  that  should  be  your  Lordships'  feeling  upon 
it,  the  result  will  necessarily  be  an  affirmance  of  the  decree.  I 
can  not,  however,  omit  to  make  some  observations  as  to  the 
media  through  which  this  conclusion  has  been  arrived  at  by  the 
different  authorities  by  whom  the  subject  has  been  considered. 

Your  Lordships  will  have  observed  that  in  the  discussion 
in  the  Court  of  Chancery  a  very  large  range  of  evidence  was 
admitted,  with  a  view  of  coming  to  a  decision  as  to  what  was  the 
intention  of  Lady  Hewley,  which  could,  after  all,  only  be  judged 
of  by  the  language  and  terms  used  in  the  deeds.  In  what  re- 
spect and  for  what  purposes  this  evidence  was  properly  received 
was  the  subject  of  one  of  the  questions  put  to  the  learned  judges, 
and  has  been  the  subject  of  some  difference  in  their  opinions. 
It  does  not  appear  to  me  necesssary  to  consider  minutely  those 
differences,  because  I  conceive  that,  keeping  strictly  within 
those  rules  which  all  the  opinibns  recognize,  there  is  sufficient, 


IN  THE  HOUSE  OF  LORDS.  455 

upon  the  view  taken  by  the  great  majority  of  the  judges,  to 
support  the  conclusion  to  which  they  have  come  upon  the  main 
point  in  the  case. 

It  was  very  clearly  and  shortly  laid  down  by  Mr.  Baron  GUR- 
NEY,  that  that  part  of  the  evidence  which  goes  to  show  the  exist- 
ence of  a  religious  party,  by  which  the  phraseology  found  in  the 
deeds  was  used,  and  the  manner  in  which  it  was  used,  and  that 
Lady  Hewley  was  a  member  of  that  party,  is  admissible,  that 
being  in  effect  no  more  than  receiving  evidence  of  the  circum- 
stances by  which  the  author  of  the  instrument  was  surrounded 
at  that  time. 

Much  evidence,  indeed,  appears  to  have  been  received,  which, 
if  of  a  nature  to  be  received,  might  fall  under  the  same  rule,  but 
which  was  objectionable  upon  other  grounds,  such  as  the  opinions 
of  living  witnesses.  But  rejecting  all  such  evidence,  enough 
appears  to  me  to  remain  unobjectionable  in  itself,  and  properly 
received  for  the  above  purpose,  to  support  the  conclusion  to 
which  a  great  majority  of  the  learned  judges  have  come. 

I  have  thought  it  right  to  make  these  observations  upon  this 
matter  of  evidence,  as  otherwise  the  affirmance  of  the  decree 
might  seem  to  sanction  the  receiving  all  the  evidence  received 
below,  which  might  tend  to  introduce  much  doubt  and  confusion 
in  other  cases. 

It  may  be  thought  that  this  opportunity  should  be  taken  of 
specifying  what  description  of  persons  are  hereafter  to  be  con- 
sidered as  proper  objects  of  the  charity.  I  think  that  any  at- 
tempt to  do  this  would  be  dangerous,  and  would  be  more  likely 
to  promote  than  to  prevent  further  litigation,  as  it  is  impossible, 
a  priori,  to  foresee  the  consequences  of  any  such  declaration,  or 
to  have  sufficient  information  as  to  the  various  interests  upon 
which  it  may  operate,  and  which  are  not  represented  in  this  suit. 
What  has  passed  in  this  cause,  and  the  valuable  opinions  which 
the  judges  have  delivered,  will,  it  may  be  hoped,  afford  such 
light  to  the  trustees  as  to  enable  them  satisfactorily  to  administer 
the  funds  for  the  future. 

It  was  made  part  of  the  complaint  upon  this  appeal,  that 
some  of  the  trustees  had  been  removed,  as  to  whom  it  had  not 
been  proved  that  they  entertained  opinions  inconsistent  with  the 
declared  purposes  of  the  trust.  I  do  not  consider  the  removal 


— 456~-/f6£"      DIMES  v.  GRAND  JUNCTION  CANAL, 

of  any  of  the  trustees  as  implying  any  reflection  upon  their 
moral  conduct.  But  as  by  the  decision  of  the  Court  it  was  found 
that  the  application  of  the  funds  for  the  time  past  had  not  been 
consistent  with  what  appeared  to  the  Court  to  be  the  real  object 
of  the  charity,  and  as  a  larger  discretion  must  necessarily  be 
left  to  the  trustees  for  the  future,  I  think  that,  as  a  matter  of 
discretion,  it  was  right  to  select  others  for  the  future  management 
of  the  funds;  and  if  that  was  right  in  1833,  it  certainly  would 
be  indiscreet  to  adopt  a  different  course  in  1842.  I  can  not, 
therefore,  think  that  it  will  be  right  to  alter  this  part  of  the 
decree. 

I  propose,  therefore,  to  your  Lordships  to  dismiss  this  appeal, 
and  I  see  no  ground  for  departing  from  the  usual  course  of  giving 
to  the  respondents  the  costs. 

Lord  BROUGHAM  concurred,  commending  the  learning  and 
research  of  the  judges,  as  shown  in  their  opinions. 

It  was  accordingly  ordered,  that  the  appeal  be  dismissed,  and 
the  decree  and  order  appealed  from  be  affirmed,  and  that  the 
appellants  pay  to  the  respondents  their  costs  of  the  appeal. 


DIMES,  APPELLANT,  v.  GRAND  JUNCTION  CANAL,  et  als, 
RESPONDENTS. 

[Decided  by  the  House  of  Lords,  in  1852,  the  Lord  Chancellor,  Lord  ST. 
LEONARDS,  Lord  BROUGHAM,  and  Lord  CAMPBELL,  delivering  opinions. 
Reported  in  3  House  of  Lords  Cases,  759.] 

A  public  company,  which  was  incorporated,  filed  a  bill  in  equity  against  a  land- 
owner in  a  matter  largely  involving  the  interests  of  the  company.  The  Lord 
Chancellor  had  an  interest  as  a  shareholder  in  the  company  to  the  amount 
of  several' thousand  pounds,  a  fact  which  was  unknown  to  the  defendant  in 
the  suit.  The  case  was  heard  before  the  Vice-Chancellor,  who  granted  the 
relief  sought  by  the  company.  The  Lord  Chancellor,  on  appeal,  affirmed  the 
order  of  the  Vice-Chancellor:  Held,  that  the  Lord  Chancellor  was  disquali- 
fied, on  the  ground  of  interest,  from  sitting  as  judge  in  the  case,  and  that 
his  decree  was,  therefore,  voidable,  and  must  consequently  be  reversed:  Held, 
also,  that  the  Vice-Chancellor  is,  under  the  63  Geo.  3,  ch.  24,  a  judge  subor- 
dinate to,  but  not  dependent  on,  the  Lord  Chancellor,  and  that,  consequently, 


IN  THE  HOUSE  OF  LORDS.  457 

the  disqualification  of  the  Lord  Chancellor  did  not  affect  him;  but  that  his 
decree  might  be  made  the  subject  of  appeal  to  the  House  of  Lords  (a). 

The  Solicitor-General,  Fitzroy  Kelly,  and  Mr.  SmythieSj  for 
the  appellant  (&). 

(a)  More  important  points  than  are  involved  in  thjs  case  are  seldom  brought 
before  a  legal  tribunal;  and  adding  to  its  interest  is  the  protracted  litigation 
involved  therein.  The  incidents  that  gave  rise  to  the  suit  occurred  in  the  year 
1797,  and  the  legal  proceedings  resulting  therefrom  were  initiated  in  1835.  Only 
such  facts  as  have  a  bearing  on  the  questions  of  interest  which  disqualify  a 
judge  from  sitting  in  a  case,  are  here  reproduced.  Buf,  the  inquiring  student 
will  be  amply  repaid  by  a  careful  reading  of  the  entire  report,  as  well  as  that 
of  Dimes  \.  Proprietors  of  the  Grand  Junction  Canal,  et  als,  3  House  of  Lords  Cases, 
794,  a  branch  of  this  same  case,  and  in  which  its  merits  are  passed  upon.  The 
recital  of  points  in  the  questions  submitted  to  the  judges,  contain  sufficient  of  the 
facts  in  the  case  to  make  the  opinions  of  the  judges  intelligent,  and  to  otherwise 
make  this  report  a  valuable  reference  on  the  legal  point  as  to  WHAT  INTEREST 

DISQUALIFIES  A  JUDGE   FROM  SITTING  IN  A  CASE. 

(5)  Taking  into  consideration  the  extremely  interesting  character  of  this  case, 
the  rule  of  not  giving  the  arguments  of  counsel  in  this  work  is  so  far  departed 
from,  as  to  present  in  this  shape  a  synopsis  of  the  points  made  and  authorities 
cited: 

In  behalf  of  the  appellant  it  was  claimed,  that  the  then  late  Lord  Chancellor 
COTTENHAM,  by  whom  the  case  was  decided  in  the  Court  of  Chancery,  being  a 
shareholder  in  the  canal  company,  was  thus  interested,  and  incompetent  to  hear 
and  decide  the  suit,  and  that  his  iucompetency  affected  the  Vice-Chancellor,  who 
was  his  deputy.  That,  therefore,  there  was  no  valid  jurisdiction  in  the  case,  and 
the  whole  proceeding  in  chancery  was  incompetent  and  void.  It  was  claimed 
that  the  principle  was  so  held  in  the  case  of  The  Queen  v.  The  Commissioners  for  the 
Paving  of  Cheltenham,  1  Queen's  Bench  Reports,  467,  though  there  the  couiuir?isioji- 
ers  were  only  rated  to  the  amount  of  a  few  shillings.  Viner's  Abridgment, 
Chancery,  L.,  is  referred  to.  In  Egerton  v.  Derby,  12  Coke,  114,  it  was  held, 
"that  the  Chamberlain  of  Chester,  being  sole  judge  of  equity,  can  not  decree  any 
thing  wherein  himself  is  party,  for  he  can  not  be  a  judge  inpropria  causa;  but  in 
such  case  where  he  is  a  party,  the  suit  shall  be  heard  in  the  Chancery  coram 
Domino  Rege."  The  Mayor  of  Hereford's  Cane,  1  Salkeld,  396,  was  cited.  Also, 
Brookes  v.  The  Earl  of  Rivers,  Hardr.  503 ;  Bridgman  v.  Holt,  Show.  P.  C.  Ill ;  The 
King  v.  Yarpole,  4  Term  Rep.  71;  Charte  v.  Kennington,  2  Str.  1173;  The  King  v. 
The  Justices  of  Essex,  5  Maule  &  Selwin,  513;  2  Rolle's  Abridgment,  92.  In  an 
anonymous  case,  1  Salkeld,  396,  Judge  HOLT  said,  "That  the  Mayor  of  Hereford 
was  laid  by  the  heels  for  sitting  in  judgment  in  a  case  in  which  he  was  himself 
lessor  of  the  plaintiff  in  ejectment,  though  by  the  charter  he  was  sole  judge  of 
the  court." 

The  learned  solicitors  for  the  appellant  quoted  1  Kent's  Commentaries,  420, 
where,  after  stating  that  it  is  a  principle  of  the  English  law,  that  the  will  of  the 
Legislature  is  the  supreme  law  of  the  land,  and  demands  proper  obedience,  he 
says:  "But  while  we  admit  this  conclusion  of  the  English  law,  we  can  not  but 
admire  the  intrepidity  and  powerful  sense  of  justice  which  led  Lord  COKE,  when 
Chief  Justice  of  the  King's  Bench,  to  declare,  as  he  did  in  Dr.  Bonham's  Case,  8 


458  DIMES  v.  GRAND  JUNCTION  CANAL, 

Mr.  Stuart  and  Mr.  Bethell,  for  the  respondents  (a). 
QUESTIONS  FOR  THE  CONSIDERATION  OF  THE  JUDGES. 

THE  Lord  Chancellor  proposed  the  following  questions  for 
the  consideration  of  the  judges  : 

"  A  public  company,  established  for  constructing  a  canal,  was  incorporated, 
and  bought  some  land  for  the  purpose  of  making  the  canal;  a  person  claiming 

Coke,  118,  that  the  common  law  doth  control  acts  of  Parliament,  and  adjudges 
them  void  when  against  common  right  and  reason.  The  same  sense  of  justice 
and  freedom  of  opinion  led  Lord  Chief  Justice  HOBART,  in  Day  v.  Salvadge,  Ho- 
bart,  87,  to  insist  that  an  act  of  Parliament  made  against  natural  equity,  as  to 
make  a  man  judge  in  his  own  case,  was  void;  and  induced  Lord  Chief  Justice 
HOLT  to  say,  in  the  case  of  The  City  of  London  v.  Wood,  12  Mod.  687,  that  the 
observation  of  Lord  Coke  was  not  extravagant,  but  was  a  very  reasonable  and 
true  saying." 

The  following  cases  were  also  cited:  The  Queen  v.  The  Cheltenham  Commis- 
sioners, 1  Queen's  Bench,  467;  The  King  v.  The  Inhabitants  of  Risiiton,  Id.  479,  n. ; 
The  Queen  v.  The  Justices  of  Hertfordshire,  6  Queen's  Bench,  753 ;  Esdtiile  v.  Lund, 
12  Mil.  &  W.  734;  Lord  Moslyn  v.  Spencer,  6  Beavan,  135.  And  as  to  the  law  in 
other  nations,  Justinian's  Institutes,  Book  4,  title  5,  law  1 ;  French  Code  de  Pro- 
cedure Civile,  Part  1,  Book  2,  title  21,  art.. 

(a)  It  was  claimed  by  the  counsel  for  respondents,  that  inasmuch  as  the  ap- 
peal was  brought  into  the  House  of  Lords  by  the  enrollment  or  allowance  of  the 
Lord  Chancellor,  if  his  judgment  was  a  nullity,  the  appeal  was  likewise  void,  and 
the  decision  of  the  Vice-Chancellor  would  consequently  be  unaffected.  It  was 
also  claimed  that  the  Vice-Chancellor  was  independent  of  the  Lord  Chancellor, 
and  the  act  of  Parliament  creating  the  office  was  cited,  53  Geo.  3,  c.  24,  sec.  2: 
"  Such  Vice-Chancellor  shall  have  full  power  to  hear  and  determine  all  causes, 
matters,  and  things  which  shall  be  at  any  time  depending  in  the  Court  of  Chan- 
cery of  England,  either  as  a  court  of  law  or  as  a  court  of  equity,  or  incident 
to  any  ministerial  office  of  the  said  court,  or  which  have  been  or  shall  be  sub- 
mitted to  the  jurisdiction  of  the  said  court,  or  of  the  Lord  Chancellor,  Lord 
Keeper,  or  Lords  Commissioners  for  the  time  being,  by  the  special  authority 
of  any  act  of  Parliament,  as  the  Lord  Chancellor,  etc.,  shall,  from  time  to 
time,  direct.  And  all  decrees,  etc.,  of  the  said  Vice-Chancellor,  shall  be  deemed 
and  taken  to  be,  as  the  nature  of  the  case  shall  require,  decrees,  etc.,  of  the 
said  Court  of  Chancery,  or  of  such  incident  jurisdiction  as  aforesaid  or  under 
such  special  authority  as  aforesaid,  and  shall  have  force  and  validity,  and  be 
executed  accordingly;  subject,  nevertheless,  in  every  case,  to  be  reversed,  dis- 
charged, or  altered  by  the  Lord  Chancellor  for  the  time  being;  and  no  such  de- 
cree or  order  shall  be  enrolled  until  the  same  shall  be  signed  by  the  Lord  Chan- 
cellor, etc.,  for  the  time  being."  Sec  3.  "Such  Vice-Chancellor  shall  sit  for  the 
Lord  Chancellor,  Lord  Keeper,  or  Lords  Commissioners,  etc.,  whenever  they  shall 
respectively  require  him  so  to  do;  and  shall  also,  at  such  other  times  as  the  Lord 
Chancellor,  etc.,  shall  direct,  sit  in  a  separate  court,  whether  the  Lord  Chan- 
cellor, etc.,  shall  be  sitting  or  not;  for  which  purpose  the  said  Lord  Chancellor, 
etc.,  shall  make  such  orders  as  to  them  respectively  shall  appear  to  be  proper 
and  convenient,  from  time  to  time,  as  occasion  may  require." 


IN  THE  HOUSE  OF  LORDS.  459 

adversely  an  interest  in  such  land  recovered  the  property  by  ejectment.  The 
corporation  then  filed  a  bill  against  the  claimant,  and  to  have  their  title  con- 
firmed. The  Lord  Chancellor  had  an  interest  as  a  shareholder  in  the  company  to 
the  amount  of  several  thousand  pounds,  which  was  unknown  to  the  defendant ; 
and  he  (the  Lord  Chancellor)  granted  the  injunction  and  the  relief  sought. 

"  Was  this  a  case  in  which  the  order  and  decree  of  the  Lord  Chancellor  were 
void  on  account  of  his  interest,  and  of  hisTiaving  decided  in  his  own  cause? 

"A  public  company,  established  for  constructing  a  canal,  was  incorporated, 
and  bought  some  land  for  the  purpose  of  making  a  canal;  a  person  claiming 
adversely  an  interest  in  such  land  recovered  the  property  by  ejectment.  The 
corporation  then  filed  a  bill  against  the  claimant,  and  to  have  their  title  con- 
firmed. 

"  The  Vice-Chancellor,  whose  authority  is  derived  under  the  53  Geo.  3,  cap. 
24,  granted  an  injunction,  and  the  relief  prayed  ;  and  the  Lord  Chancellor,  who 
had  an  interest  as  a  shareholder  in  the  company  to  the  amount  of  several  thou- 
sand pounds,  which  was  unknown  to  the  defendant,  upon  an  appeal  by  the  de- 
fendant, affirmed  the  orders  made  by  the  Vice-Chancellor.  The  orders  were  then 
enrolled,  some  upon  the  application  of  the  defendant,  and  others  upon  the  appli- 
cation of  the  plaintiff,  by  the  order  of  the  Lord  Chancellor. 

1.  "Were  the  orders  of  the  Vice-Chancellor  void  on  account  of  the  interest 
of  the  Lord  Chancellor  ? 

2.  "Were  the  orders  of  the  Lord  Chancellor  void  on  account  of  his  interest, 
and  of  his  having  decided  in  his  own  cause?" 

OPINION  OF  THE  JUDGES. 

Mr.  Baron  PARKE  :  In  answer  to  the  first  question  proposed 
by  your  Lordships,  I  have  to  state  the  unanimous  opinion  of  the 
judges,  that,  in  the  case  suggested,  the  order  or  decree  of  the 
Lord  Chancellor  was  not  absolutely  void  on  account  of  his  inter- 
est, but  voidable  only. 

If  this  had  been  a  proceeding  in  an  inferior  court,  one  to 
which  a  prohibition  might  go  from  a  court  in  Westminster  Hall, 
such  a  prohibition  would  be  granted,  pending  the  proceedings, 
upon  an  allegation  that  the  presiding  judge  of  the  court  was 
interested  in  the  suit.  Whether  a  prohibition  could  go  to  a 
court  of  chancery,  it  is  unnecessary  to  consider. 

If  no  prohibition  should  be  applied  for,  and  in  cases  where 
it  could  not  be  granted,  the  proper  mode  of  taking  the  objection 
to  the  interests  of  the  judge  would  be,  in  courts  of  common  law, 
by  bringing  a  writ  of  error,  for  error  in  fact,  and  assigning  that 
interest  as  cause  of  error. 

The  former  course  was  stated  to  be  proper  in  the  case  of 
Brooke  v.  Earl  of  Rivers,  Hardr.  503,  it  being  suggested  that  the 
Earl  of  Derby,  who  was  Chamberlain  of  Chester,  had  an  inter- 


460  DIMES  v.  GRAND  JUNCTION  CANAL, 

est  in  the  suit ;  and  the  court  held  that,  where  the  judge  had 
an  interest,  neither  he  nor  his  deputy  can  determine  a  cause  or 
sit  in  court  ;  and  if  he  does,  a  prohibition  lies. 

The  latter  course  was  adopted  in  the  case  of  The  Company 
of  Mercers  and  Ironmongers  of  Chester  v.  Bowker,  1  Stra.  639, 
where  it  was  assigned  for  error  in  fact,  on  the  record  of  a  judg- 
ment for  the  Company  of  Mercers  in  the  Mayor's  Court  of 
Chester,  that  after  verdict,  and  before  judgment,  one  of  the 
Company  of  Mercers  became  mayor ;  and  for  that  reason  the 
judgment  was  reversed  in  the  Court  of  Quarter  Sessions,  and 
that  judgment  of  reversal  affirmed  in  the  King's  Bench. 

In  neither  of  these  cases  was  the  judgment  held  to  be  abso- 
lutely void.  Till  prohibition  had  been  granted  in  one  case,  or 
judgment  reversed  in  the  other,  we  think  that  the  proceedings 
were  valid,  and  the  persons  acting  under  the  authority  of  the 
court  would  not  be  liable  to  be  treated  as  trespassers. 

The  many  cases  in  which  the  Court  of  King's  Bench  has 
interfered  (and  may  have  gone  to  a  great  length),  where  inter- 
ested parties  have  acted  as  magistrates,  and  quashed  the  orders 
made  by  the  court  of  which  they  formed  part,  afford  an  analogy. 

None  of  these  orders  is  absolutely  void.  It  would  create 
great  confusion  and  inconvenience  if  it  were.  The  objection 
might  be  one  of  which  the  parties  acting  under  these  orders 
might  be  totally  ignorant  till  the  moment  of  the  trial  of  an  ac- 
tion of  trespass  for  the  act  done ;  but  these  orders  may  be 
quashed  after  being  removed  by  certiorari}  and  the  court  shall 
do  complete  justice  in  that  respect. 

We  think  that  the  order  of  the  Chancellor  is  not  void ;  but 
we  are  of  opinion,  that  as  he  had  such  an  interest  which  would 
have  disqualified  a  witness  under  the  old  law,  he  was  disqualified 
as  a  judge ;  that  it  was  a  voidable  order,  and  might  be  ques- 
tioned and  set  aside  by  appeal,  or  some  application  to  the  Court 
of  Chancery,  if  a  prohibition  would  not  lie. 

As  to  the  second  question,  we  are  of  opinion  that  the  Vice- 
Chancellor,  under  53  Geo.  3  c.  24,  is  not  the  mere  deputy  of  the 
Chancellor.  We  agree  that  the  interest  of  the  principal  affects 
the  deputy,  on  the  rule  adopted  in  Wood  v.  Corporation  of  Lon- 
don, 12  Mod.  669,  686,  et  scq.,  and  Brooke  v.  Earl  of  Rivers, 
Hardr.  503 ;  but  we  think  that  the  Vice-Chancellor  is  not  a 


IN  THE  HOUSE  OF  LORDS.  461 

deputy,  but  has  independent  jurisdiction  to  make  decrees,  sub- 
ject to  the  power  of  the  Chancellor,  to  be  reversed,  discharged, 
or  altered  By  the  Chancellor. 

We  think  this  is  to  be  deduced  from  the  language  of  the 
statute.  By  the  second  section,  the  Vice-Chancellor  has  full 
power  to  hear  and  determine  all  matters,  causes,  and  things  de- 
pending in  the  Court  of  Chancery ;  and  all  decrees,  orders,  and 
acts  of  such  Vice-Chancellor  so  made  or  done  shall  be  deemed 
to  be  orders  and  acts  of  the  Court  of  Chancery,  and  shall  have 
force  and  validity,  and  be  executed,  subject,  nevertheless,  in 
every  case,  to  be  reversed,  discharged,  altered,  or  allowed ;  and 
no  decree  shall  be  enrolled  until  signed  by  the  Lord  Chancellor. 
If  the  decrees  or  orders  are  not  reversed  by  the  Lord  Chancel- 
lor, they,  in  our  opinion,  are  obligatory,  and  are  in  no  sense 
affected  by  the  disqualification  of  the  Lord  Chancellor. 

But  in  order  to  appeal  against  them  to  the  House  of  Lords, 
they  must  be  enrolled ;  arid  enrollment  can  not  be  made  without 
the  Lord  Chancellor's  signature.  In  giving  that  signature,  the 
Chancellor  has  a  discretion  which  he  may  exercise.  But  he 
may  be  applied  to  for  that  purpose,  and  if  he  gives  his  signa- 
ture, his  interest  affords  no  objection  to  its  validity.  For  this 
is  a  case  of  necessity,  and  where  that  occurs  the  objection  of 
interest  can  not  prevail.  Of  this  the  case  in  the  Year  Book, 
8  Hen.  6,  19  (2  Roll.  Abr.  93),  is  an  instance,  where  it  was  held 
that  it  was  no  objection  to  the  jurisdiction  of  the  Common  Pleas 
that  an  action  was  brought  against  all  the  judges  of  the  Com- 
mon Pleas,  in  a  case  in  doubt  which  could  only  be  brought  in 
that  court. 

We  therefore  answer  the  second  question  by  saying,  that  the 
orders  of  the  Vice-Chancellor  are  neither  void  nor  voidable  on 
account  of  the  interest  of  the  Lord  Chancellor.  That  the  orders 
of  the  Lord  Chancellor  are  not  void,  but  voidable,  and  his  sig- 
nature to  the  order  for  the  purpose  of  enrollment  is  neither  void 
nor  voidable. 

The  LORD  CHANCELLOR:  In  reference  to  the  question  upon 
which  her  majesty's  judges,  a  few  days  since,  gave  their  opin- 
ion, at  the  desire  of  this  House,  the  effect  of  that  opinion,  in 
which  I,  for  one,  entirely  concur,  is,  that  having  regard  to  the 


462  DIMES  v.  GRAND  JUNCTION  CANAL, 

interest  which  the  late  Lord  Chancellor  had  in  the  Grand  June 
tion  Canal  Company,  his  decision  must  be  deemed  to  be  voida- 
ble, and  that  an  appeal  to  this  House  must  be  considered,  as  a 
proceeding  in  a  court  of  equity,  the  proper  step  to  be  taken  to 
avoid  such  a  decree.  Adopting  the  opinion  of  the  learned 
judges  in  that  respect,  it  will  be  proper  to  declare  that  the  or- 
ders and  decrees  appealed  against,  so  far  as  they  were  made  by 
the  late  Lord  Chancellor,  shall  be  reversed.  Upon  that,  my 
noble  and  learned  friends  and  myself  entirely  agree. 

Upon  the  other  question,  upon  which  I  never  entertained 
any  doubt — namely,  whether  the  decrees  and  orders  of  the  Vice- 
Chancellor  could  be  affected  by  the  circumstance  that  the  Lord 
Chancellor  who  affirmed  them  had  an  interest  in  the  subject- 
matter  of  the  suit — the  learned  judges  have  given  the  House  a 
very  clear  opinion,  and  in  that  opinion  I  entirety  concur;  it 
is  that  which  I  always  entertained.  It  is  impossible  to  repre- 
sent, upon  the  statutable  authority  given  to  the  Vice-Chancellor, 
that  he  is  in  the  situation  of  a  mere  deputy,  so  as  to  fall  within 
the  cases  referred  to,  or  to  say  that  therefore  any  order  or  de- 
cree made  by  him  would  be  void  or  voidable,  in  case  the  Lord 
Chancellor  himself  had  an  interest  in  the  matter  of  the  suit. 
There  is  no  warrant  for  such  an  opinion  in  the  words  of  the 
statute,  and  I  can  not  conceive  any  thing  more  mischievous  or 
absurd  than  to  suppose  that  an  order  or  decree  made  by  one  of 
the  Vice-Chancellors  should  be  void  in  a  case  where  the  Lord 
Chancellor  did  not  interfere  judicially,  merely  because  the  Lord 
Chancellor  himself  had  an  interest  in  the  subject  of  the  suit. 
Lord  COTTENHAM  thought  so  differently  upon  that  point,  that  he 
called  in  one  of  the  judges  of  the  court ;  that  judge,  no  doubt, 
possessing  in  some  measure  an  original  jurisdiction,  but  still  an 
inferior  judge — he  called  that  judge  in  to  his  assistance,  to  ad- 
vise him  upon  the  very  point  now  being  decided  by  your  Lord- 
ships. I  apprehend  that  these  decrees  of  the  Vice-Chancellor 
are  good  so  far  as  they  can  be  maintained  consistently  with 
the  rules  of  equity ;  and  if  your  Lordships  should  be  of 
opinion  that  the  case  is  not  made  out  on  the  part  of  the  ap- 
pellant as  to  the  equity  he  asserts — that  is  to  say,  that  no 
relief  ought  to  have  been  granted  to  the  company  as  against 
him — I  apprehend  you  will  feel  no  difficulty  in  affirming  the 


IN  THE  HOUSE  OF  LORDS.  463 

orders  and  decrees  of  the  Vice-Chancellor,  and  of  declaring  that 
they  shall  be  held  to  be  good,  and  unaffected  by  any  thing  which 
took  place  as  to  the  affirmance  of  them  or  the  dealing  with  them 
by  the  Lord  Chancellor. 

Lord  BROUGHAM  :  There  are  two  branches  of  this  case  to 
which  my  noble  and  learned  friend  has  referred.  One  of  them 
is  that  which  arises  upon  the  first  argument  of  the  appellant, 
upon  which  your  Lordships  have  taken  the  opinion  of  the 
learned  judges ;  and  it  is  immaterial,  as  to  the  result  of  this 
case,  in  which  way  we  dispose  of  the  first  question  put  to  the 
learned  judges ;  namely,  whether  or  not  the  Lord  Chancellor,  in 
respect  of  his  interest,  was  disqualified  from  acting  as  a  judge 
in  the  cause,  and  therefore  whether  his  decree  was  void  or  void- 
able. That  it  was  not  void,  my  noble  and  learned  friend  on  the 
Woolsack,  and  my  noble  and  learned  friend,  Lord  CRANWOETH, 
who  is  not  now  here,  entertained,  during  the  argument,  a  very 
strong  opinion.  The  learned  judges  consulted  have  come  to  a 
clear  opinion  upon  that  subject,  and  the  decree  is  not  void,  but 
only  voidable ;  nevertheless,  that  it  is  to  be  avoided  when 
brought  under  review,  and  upon  objection  taken.  But  with 
respect  to  the  second  point  submitted  to  them,  whether  or  not 
the  Vice-Chancellor's  judgment  is  void,  in  respect  of  the  Lord 
Chancellor's  authority  being  null  from  the  beginning  of  the 
wrhole  proceedings  in  the  Court  of  Chancery,  I  must  say  that  I 
never  from  the  beginning  had  the  least  doubt,  and  was  therefore 
very  little  surprised  to  find  the  learned  judges  declare  that  the 
Vice-Chancellor  has  entirely  independent  jurisdiction,  and  is  not 
in  any  respect  dependent  upon  the  Lord  Chancellor,  from  whom 
he  only  receives  directions  as  to  what  cases  he  shall  entertain 
and  dispose  of.  That  by  the  act  is  the  only  connection  which 
subsists  between  the  two  branches  of  the  Court  of  Chancery, 
with  the  exception  of  the  final  enrollment,  which  requires  the 
previous  signature  of  the  Lord  Chancellor ;  but,  as  plainly  as 
an  enactment  can  speak,  the  Vice-Chancellor  has  a  substantive 
and  an  independent  jurisdiction  conferred  upon  him  by  the  very 
words  of  the  statute ;  and  it  is  expressly  stated  in  that  statute 
that  his  decrees  shall  be  decrees  of  the  Court  of  Chancery, 
and  shall  have  execution  as  such.  And  then  follows  the  only 


464  DIMES  v.  GRAND  JUNCTION   CANAL; 

connection  established  between  his  proceedings  and  those  of  the 
Lord  Chancellor,  that  there  shall  be  no  enrollment  of  a  decree, 
with  the  view  to  further  proceedings,  without  the  previous  signa- 
ture of  the  Lord  Chancellor;  but  the  giving  of  that  signature 
can  not  jifTect  the  validity  of  the  Vice-Chancellor's  decree. 
Therefore,  my  Lords,  we  have  now  in  the  first  place  to  declare, 
agreeing  in  opinion  with  the  learned  judges,  that  the  interest  of 
the  Lord  Chancellor  rendered  his  decree  voidable,  and  to  declare 
that  the  decree  is  reversed,  and  we  have  then  to  deal  with  the 
decree  of  the  Vice-Chancellor. 

I  Lord  CAMPBELL  :  I  take  exactly  the  same  view  of  this  case 
as  do  my  noble  and  learned  friends,  and  I  have  very  little  to 
add  to  their  observations.  With  respect  to  the  point  upon 
which  the  learned  judges  were  consulted,  I  must  say  that  I  en- 
tirely concur  in  the  advice  which  they  have  given  to  your  Lord- 
ships. No  one  can  suppose  that  Lord  COTTENHAM  could  be,  in 
the  remotest  degree,  influenced  by  the  interest  that  he  had  in 
this  concern ;  but,  my  Lords,  it  is  of  the  last  importance  that 
the  maxim  that  no  man  is  to  be  a  judge  in  his  own  cause  should 
be  held  sacred.  And  that  is  not  to  be  confined  to  a  cause  hi 
which  lie  is  a  party,  but  applies  to  a  cause  in  which  he  has  an 
interest.  Since  I  have  had  the  honor  to  be  Chief  Justice  of  the 
Court  of  Queen's  Bench,  we  have  again  and  again  set  aside  pro- 
ceedings in  inferior  tribunals  because  an  individual  who  had  an 
interest  in  a  cause,  took  a  part  in  the  decision.  And  it  will  have 
a  most  salutary  influence  on  these  tribunals  when  it  is  known 
that  this  high  Court  of  last  resort,  in  a  case  in  which  the  Lord 
Chancellor  of  England  had  an  interest,  considered  that  his  de- 
cree was,  on  that  account,  a  decree  not  according  to  law,  and 
was  set  aside.  This  will  be  a  lesson  to  all  inferior  tribunals  to 
take  care  not  only  that  in  their  decrees  they  are  not  influenced 
by  their  personal  interest,  but  to  avoid  the  appearance  of  labor- 
ing under  such  an  influence.  It  is  quite  clear,  likewise,  I  be- 
lieve, that  the  orders  of  the  Vice-Chancellor  can  not  be  in  the 
slightest  degree  affected  by  what  the  Lord  Chanceller  has 
done,  nor  can  it  be  maintained  that  the  Vice-Chancellor  was 
acting  merely  as  the  Lord  Chancellor's  deputy  when  these  orders 
and  decrees  were  pronounced. 


IN  THE  HOUSE  OF  LORDS. 


The  Lord  Chancellor's  decree  and  orders  were  reversed,  and 
those  of  the  Vice-Chancellor  confirmed  (a). 

(a)  WHERE  TRUSTEES  HAVE  A  PERSONAL  INTEREST.  —  Tyrrell  v.  Sank  of  Lon- 
don, 10  House  of  Lords  Cases,  26:  T,  a  solicitor,  had  a  private  arrangement  with 
R,  by  which  he  was  to  receive  from  R  a  share  in  certain  property  then  belonging 
to  R,  and  to  share  the  profit  to  be  obtained  from  the  sale  of  that  property.  In 
his  character  of  solicitor,  T  acted  for  clients  (a  banking  company)  in  the  pur- 
chase of  the  larger  portion  of  that  property,  never  communicating  to  his  clients 
the  fact  of  his  having  an  interest  in  it:  Held,  affirming  the  decree  of  the  court 
below,  that  T  was  to  be  treated  as  a  trustee  for  his  clients  in  respect  of  his  share 
of  so  much  of  the  property  as  they  had  actually  purchased  ;  but  a  part  of  the 
decree,  which  had  declared  him  to  hold  the  unsold  property  also  in  trust  for  his 
clients,  was  varied  ;  and  instead  thereof,  the  value  of  T's  half  of  that  property 
was  directed  to  be  taken  into  account  in  ascertaining  what  was  due  from  him  to 
his  clients.  He  having  made  a  large  profit  on  the  sale,  was  ordered  to  pay  back 
the  amount  of  this  profit,  with  the  full  amount  of  interest  given  in  cases  of  a 
breach  of  trust;  namely,  five  per  cent. 

Imperial  Mercantile  Credit  Association  v.  Coleman,  G  Chancery  Appeals,  558: 
By  the  articles  of  association  of  a  financial  company,  it  was  provided  that  a  di- 
rector should  vacate  his  office  if  he  participated  in  the  profits  of  any  work  done 
for  the  company  without  declaring  his  interest  at  a  meeting  of  the*directors.  A 
director  having  undertaken  to  obtain  money  for  certain  railway  debentures  at 
five  per  cent  commission,  offered  them  to  the  company  at  one  and  a  half  percent 
commission.  The  offer  came  before  a  committee  of  directors,  of  which  he  was  not 
a  member,  and  they  recommended  the  board  to  accept  the  offer.  The  recommenda- 
tion came  before  a  meeting  of  the  directors,  at  which  the  director  making  the  offer 
was  present.  He  stated  that  he  was  interested  in  the  matter,  and  proposed  to 
retire,  but  was  told  by  the  chairman  that  it  was  unnecessary,  and  the  offer  was 
accepted  by  the  board.  The  director  appeared  to  have  previously  given  full  in- 
formation to  the  two  managers  of  the  company  as  to  his  interest  in  the  debentures: 
Held  (reversing  the  decree  of  MALINS,  Vice-Chancellor),  that,  according  to  the 
articles  of  association,  it  was  contemplated  that  a  director  might  have  an  interest 
in  business  brought  by  him  to  the  company;  and  that,  under  the  circumstances, 
this  director  could  retain  the  difference  between  one  and  a  half  per  cent  and  five 
per  cent  commission. 

30 


466~ fiW  COV.  &  LEX.  R.  R.  CO.  ».  BOWLER,  ET  ALS., 


COURT*  OF  APPEALS  OF  KENTUCKY. 

WINTER  TERM,  1873. 


HON.  M.  R.  HARDIN,  CHIEF  JUSTICE. 
HON.  B.  J.  PETERS,  ) 

HON.  WILLIAM  LINDSAY,  [•  JUDGES. 
HON.  WILLIAM  S.  PRYOR, ) 


THE  COVINGTON  AND  LEXINGTON  RAILROAD  Co.,  APPELLANT, 

versus 

JAMES  WINSLOW,  JOHN  A.  STEVENS,  CHARLES  N.  FEARING, 
ELI  C.  BALDWIN,  Administrator  of  ROBERT  B.  BOWLER,  de- 
ceased, SUSAN  L.  BOWLER,  widow,  GEORGE  P.  BOWLER, 
ROBERT  B.  BOWLER,  and  LOUISA  BOWLER,  JOHN  T.  LEVIS, 
RICHARD  STOWERS,  JAMES  C.  GEDGE,  WILLIAM  ERNST, 
JOHN  W.  STEVENSON,  A.  HATHAWAY,  THOMAS  H.  KENNEDY, 
and  JAMES  C.  GEDGE,  Administrators  of  W.  H.  GEDGE, 
deceased,  FRED.  C.  GEDGE,  LEWELLYN  GEDGE,  BURTON  H. 
GEDGE,  MARY  H.  GEDGE,  MARY  H.  GEDGE,  JR.,  GEORGE  C. 
DODGE,  JR.,  LAURA  H.  DODGE,  WILLIAM  B.  GEDGE,  and 
CLARA  B.  GEDGE,  APPELLEES. 

1.  JURISDICTION. — Where  a  judicial  sale  made   by  the  Fayette  Circuit  Court, 
and  the  supervision  of  the  property  sold  is  retained  by  the  Court  for  the 
purpose  of   carrying  out  the  terms  of   the  sale,  the  Ken  ton  Circuit  Court 
has  jurisdiction   in    an  original    action    to  charge   the    purchaser  of   such 
property  as  trustee   for  the   original   owners.      Neither  Court  will   be  re- 
quired to  subordinate  itself  to  the  other. 

2.  LIMITATION    OF    ACTIONS. — Where    the    petition    alleges    breaches   of  trust, 
whereby  the  trust  property  (a  railroad)  is  sold,  and  one  of  the   directors 
becomes  the  purchaser,  and  the  prayer  is  that  such  purchase  be  annulled, 
the  property  be  declared  to  be  held  in  trust,  and  adjudged   to  be  recon- 
veyed  to  the  beneficiary,  and  for  an  account,  the  suit  is  not  for  the  recovery 
of  real  estate,  as  contemplated  by  sec.  2,  art.  1,  ch.  63,  2  Rev.  Stat.  123,  or 
for  relief  on  the  ground  of  fraud ;  but  is  a  suit  to  declare  and  enforce  an 
implied  or  constructive  trust,  and  is  barred  in  five  years. 

8.  In  such  case,  the  purchaser  having  deceased  within  five  years  from  the  time 
of   his  purchase,  and  the    suit   brought  within   one   year  after  letters  of 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  467 

administration  were  taken  out  on  his  estate,  the  suit  is  within  the  time  limited 
by  the  statute.  Sec.  5,  art.  4,  ch.  63,  2  Rev.  Stat.  132. 

4.  TRUSTKES. — A  director  is  a  trustee  for  the  corporation,  and  it  being  his  duty 
to  act  in  good  faith  toward  his  beneficiary,  it  is  a  breach  of  trust  on  his 
part  to  create  any  relation  between  himself  and  the  trust,  property,  whereby 
it  becomes  his  interest  to  subserve  his  individual  interests  at  the  expense 
or  to  the  injury  of  such  beneficiary,  or  the  trust-property. 

5.  PURCHASE  OF  TRUST  ESTATE  BY  TRUSTEE. — Where  the  director  purchases  the 

trust  property  at  a  judicial  sale  thereof,  he  takes  and  holds  the  property  in 
trust  for  the  corporation.  Such  person  will  not  be  allowed  to  purchase 
and  make  profit  out  of  the  estate  of  those  to  whom  he  occupies  such  a 
confidential  relation. 

6.  Where  a  majority  of  directors  place  themselves  in  a  position  of  hostility  to 
the  interest  of  the  trust,  such  majority  incapacitate  themselves  for  doing  a 
valid  act,  whereby  the  corporation  would  be  bound  in  regard  to  such  in- 
terests, and   deprive  the  minority  of  the  legal  power  of  acting  in   regard 
thereto. 

7.  BREACHES  OF  TRUST  CONSIDERED. — In  this  case,  diverting  the  means  of  the 
road  from  paying  interest  on  preferred-mortgage  claims  in  suit,  and  for  de*- 
fault  in  which  a  sale  is  ordered,  to  making  improvements  on  the  road  which 
might  have  been  dispensed  with,  or  deferred,  evidences  an  intention  to  bring 
the  road  to  sale. 

8.  It  is  not  a  good  defense  on  the  part  of  the  principal  in  such  and  similar 
transactions,  that   his   co-directors  participated  therein  and   approved    the 
same,  because  it  is  not  denied  that  he  exercised  over  such  co-directors  a 
controlling  influence.     From  the  time  he  concluded  to  prepare  for  the  pur- 
chase of  the  road,  his  personal  interests  became  antagonistic  to  that  of  the 
corporation,  and  he  ought  to  have  ceased  to  act  as  a  director. 

9.  ACQUIESCENCE. — The  rejection  of  a  proposition  made  through  the  columns  of 

a  newspaper,  to  which  conditions  are  attached  which  the  beneficiary  is  nei- 
ther legally  nor  morally  bound  to  accept,  does  not  raise  the  presumption  of 
acquiescence.  Under  the  circumstances  in  this  case,  the  corporation  had 
the  right  to  have  its  property  delivered  to  it  by  placing  the  holder  in 
statu  quo. 

10.  The  offer  to  restore  in  this  case  distinguished  from  that  in  Roach  v.  Hudson, 
8  Bush,  410  (reproduced  herein,  pages  418.  550),  wherein  the  offer  of  resto- 
ration was  held  to  be  reasonable,  and  the  refusal  to  accept  the  same  held 
binding. 

11.  Merely  remaining  passive  does  not  deprive  a  party  of  the  right  to  seek  relief, 
unless,  in  addition  thereto,  he  does  some  act  to  induce  or  encourage  others  to 
expend  their  money  or  alter  their  condition,  and  thereby  renders  it  uncon- 
scientions  for  him  to  enforce  his  claim.     "No  such  act  upon  the  part  of  the 
company  is  shown  in  this  case." 

12.  NECESSARY  PARTIES. — In  this  case,  notwithstanding  the  conveyance  in  trust, 
the  relation  of  trustee  for  the  corporation  continued   in  the  original   pur- 
chaser, the  director,  and  his  representatives  should  be  made  a  party  in   a 
suit  to  establish  a  claim  against  the  trust  property;  and  the  suit  being  also 
for  the  recovery  of  the  property  itself,  the  beneficiaries  under  the  convey- 
ance in  trust  are  also  necessary  parties  in  the  suit. 


468  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

13.  PRACTICE — ESTOPPEL. — In  such  case,  where  the  purchaser  at  the  judicial  sale 
claims  a  vendible  interest  in  the  property,  and  executes  a  conveyance  thereof, 
in  trust,  the  holders  themselves  recognize  such  power  by  purchasing  such 
interest;  and  being  held  in  trust,  the  beneficiary  can  call  upon  a  court  of 
equity  to  declare  the  same,  and  compel  a  relinquishment  of  the  claim  thereto. 

14.  Where  the  title  held  is  a  naked  trust,  with  only  a  limited  power  to  convey, 
and  the  management  rests  with  the  beneficiaries,  the  heirs  of  a  deceased  ben- 
eficiary are  necessary  parties  in  a  suit  to  establish  the  implied  trust  arising 
from  the  directorship  and  purchase  during  its  continuance. 

15.  ESTOPPKL. — Where  directors  fail  to  interpose  an  equitable  defense  in  a  suit 
against  the  corporation,  such  failure   can  not  protect  one  of    the  faithless 
directors  in  his  profits  realized  by  such  breach  of  official  duty. 

16.  WHERE  STOCKHOLDERS  ARE  ESTOPPED. — Individual  stockholders,  being  ad- 
mitted as  parties  in  a  suit  wherein  the  corporation  is  also  a  party,  and  filing 
pleadings  therein,  act  for  themselves  only,  and  not  for  the  corporation;  and 
the  latter  is  not  bound  or  estopped  by  the  action  of  the  court  thereon,  al- 
though they  may  have  set  up  the  same  acts  as  grounds  for  relief  that  are 
afterward  relied  upon  by  the  corporation. 

17.  INSOLVENCY. — If  an  insolvent  corporation  should  become  a  bidder  for  its  own 
property  at  a  judicial  sale,  and  comply  with  the  terms  thereof,  it  would  in 
such  case  become  the  purchaser ;  and  there  is  no  valid  reason  to  deprive  it 
of  the  right  to  charge  its  trustee  as  such  purchaser,  and  he  can  not  set  up 
the  insolvency  of  his  beneficiary  as  a  defense. 

18.  In  this  case  it  is  the  duty  of  the  appellant  to  pay  its  debts ;  and  if  this  can 
not  be  done,  still  it  is  its  duty  to  require  possession  of  the  road,  that  it  may 
be  again  sold  for  the  benefit  of  creditors  whose  debts  have  not  been  paid. 
The  appellees  have  no  right  to  demand  a  resale;  but  the  creditors  have  the 
right  so  to  do,  in  a  proper  tribunal,  in  default  of  the  payment  of  their  just 
claims. 

19.  INNOCENT  PURCHASERS. — Where  a  special  warranty  of  title  is  taken  by  the 
grantee  under  such  circumstances  as  imply  knowledge  that  the  property  was 
held  in  trust,  the  grantee  is  not  an  innocent  purchaser   entitled  to   hold 
against  a  beneficiary  of  the  grantor. 

20.  GRANTOR  AND  GRANTEE. — When  the  grantee  has  knowledge  that  the  grantor 
was  a  director  in  the  corporation  of  the  beneficiary  at  the  time  he  acquired 
the  property,  the  latter  is  put  upon  inquiry  ns  to  the  character  of  the  title 
to  the  property  which  the  director  thus  acquired. 


21.   TIIK  MANDATE  (which  follows,  page  596)  prescribed  the  terms  of  settlement 
between  the  parties,  namely : 

1.  Appellant  is  entitled  to  the  gross  earnings  of  the  road  from  the  time  it  was 
taken  control  of  by  the  Fayette  Circuit  Court  until  surrendered,  with  interest 
from  the  end  of  each  year,  with  judgment  therefor  if  the  balance  is  in  favor 
of  appellees,  after  giving  credit  for  these  items: 

2.  All  payments  by  appellees  on  account  of  the  debts  of  the  company.     All 
sums  expended  in  keeping  up  the  road,  rolling  stock,   and  machinery,  to- 
gether with  permanent  improvements.     Expenses  of  running  the  road,  and 
compensation  of  directors,  superintendents,  and  other  employes. 

A  judgment  to  follow  in  favor  of  the  party  having  the  balance  in  its  favor. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  469 

THIS  cause  was  brought  to  the  Court  of  Appeals  by  an  Ap- 
peal from  the  Kenton  Circuit  Court,  wherein  the  petition  of  the 
plaintiffs,  the  Railroad  Company,  was  dismissed  on  the  rulings 
of  Hon.  JOHN  W.  MENZIES,  Special  Judge,  Hon.  JAMES  O'HARA, 
Circuit  Judge,  being  of  counsel  in  the  case  for  defendants. 

THE  ORIGINAL  PETITION 

Was  filed  on  the  30th  of  September,  1865  (a),  and  recited  the 
organization  of  the  company,  and  the  construction  of  its  road, 
from  the  city  of  Covington  southerly  as  far  as  Paris,  eighty  and 
a  quarter  miles,  and  the  procurement  of  the  right  of  way,  and 
the  grading  thereof  from  thence  to  Lexington,  eighteen  miles. 
That  the  capital  stock  subscribed  amounted  to  $1,392,400,  all 
of  which  was  paid  up  except  $53,113.77,  which  was  paid  in 
part ;  and  that  of  this  stock  Covington  took  $300,000,  and  in- 
dorsed the  bonds  of  the  company  to  the  amount  of  $200,000, 
which  said  city  has  to  pay,  principal  and  interest ;  and  that  the 
county  of  Pendleton  took  $50,000  stock,  the  county  of  Bourbon 
$100,000,  and  the  county  of  Fayette  $200,000,  all  of  which, 
including  that  of  Covington,  was  paid  in  full.  That  the  balance 
of  the  stock  was  subscribed  and  paid  for  by  individuals,  except 
to  the  amount  of  $200,000,  held  by  the  city  of  Cincinnati,  as 
security  for  a  loan  of  $100,000.  That  said  road,  from  time  to 
time,  was  provided  with  depot-houses,  engines,  rolling  stock,  etc., 
and  after  the  completion  of  the  road  to  Paris,  other  roads  were 
leased  and  run  by  the  company,  thus  making  a  continuous  line 
of  railway  to  Lexington  and  Nicholasville  ;  and  that  by  means 
thereof,  the  company  received  sufficient  income  to  pay  all  cur- 
rent running  expenses,  of  keeping  the  same  in  repair  and 

(a)  A  certificate  of  the  Clerk  of  the  Kenton  Circuit  Court,  attached  to  the 
printed  record  of  the  case,  says  the  petition  was  sworn  to  by  "one  of  the  attor- 
neys for  the  plaintiff,  on  the  23d  day  of  March,  with  the  date  of  the  year  torn  off." 
It  was  claimed  by  appellant's  counsel,  that  the  petition  had  been  prepared  for 
filing  in  the  month  of  March,  1865,  and  was  not  then  filed,  because  administra- 
tion on  Mr.  Bowler's  estate  was  first  taken  out  in  Kentucky,  on  the  13th  of  Feb- 
ruary, 1865,  and  that  suit  could  not  be  brought  within  six  months  thereafter, 
under  the  first  section  of  the  act  of  February  27,  1865,  providing,  "No  suit  or 
action,  except  suits  and  actions  to  settle  up  the  estate  of  decedents,  shall  be  com- 
menced against  any  personal  representatives  until  six  months  after  adminis- 
tration shall  have  been  first  granted  upon  said  estate  by  the  Courts  of  this 
Commonwealth." — Supplement  to  the  Revised  Statutes  of  Kentucky,  page  222. 


470  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS-, 

stocked,  and  all  accruing  interest  on  its  indebtedness,  and  suffi- 
cient besides  to  create  a  sinking  fund  to  pay  off  the  indebtedness. 

The  petition  set  forth  the  issuing  by  the  company  of  $400,- 
000  of  first  mortgage  bonds  to  Stevens  and  Fearing,  trustees ; 
also,  of  $1,000,000  of  second  mortgage  bonds  to  James  Winslow, 
trustee ;  and  of  $600,000  of  third  mortgage  bonds  to  the  same 
trustee.  That  previous  to  the  issuing  of  the  third  mortgage 
bonds,  M.  M.  Benton,  President ;  Samuel  J.  Walker,  Treasurer ; 
John  B.  Casey,  Charles  A.  Withers,  A.  Robbins,  F.  G.  Gedge,  and 
John  T.  Levis,  Directors,  had  become  liable,  as  indorsers,  etc., 
for  the  company,  to  an  alleged  amount  of  $550,000;  and  the 
company  had,  by  its  said  President,  executed  and  delivered  to 
them  an  indemnifying  mortgage  on  the  road.  But  that  subse- 
quently, the  $600,000  of  third  mortgage  bonds  were  delivered 
to  Benton,  Casey,  and  Levis,  trustees,  for  the  same  purpose, 
and,  by  agreement  of  the  parties  in  interest,  the  prior  lien  of 
the  ll  Director's  Mortgage,"  so  called,  was  waived  in  favor  of 
the  said  third  mortgage  bonds.  That  these  bonds  were  by  said 
trustees  sold  to  James  W.  Walker  at  50  cents  on  the  dollar,  in 
consideration  whereof,  he  agreed  to  pay  off  $300,000  of  the 
il  Director's  debt,"  so  called,  being  the  liabilities  as  indorsers, 
etc.  This  was  to  be  done  in  about  equal  annual  payments  in 
five  years,  and  ample  security  was  given  "  for  the  performance  of 
said  contract  on  his  part ;  that  from  thenceforward  said  parties 
were  amply  secured  against  said  responsibilities,  and  the  said 
Walker  fully  performed  his  part  of  said  agreement,  before  the 
time  stipulated  therein;  and  the  balance  of  said  liabilities  of 
Benton,  Levis,  Casey,  and  others  for  the  plaintiff,  remaining 
after  the  execution  of  said  contract,  on  the  13th  day  of  Decem- 
ber, 1855,  were  soon  thereafter  paid  off  by  the  company,  and 
the  parties  released  therefrom." 

The  petition  further  stated,  that  Robert  B.  Bowler,  who 
died  on  the  4th  of  July,  1864,  became  a  stockholder,  and  was 
elected  a  director  in  December,  1857;  that  Bowler  became  a 
director  with  the  view  of  looking  after  his  interests  as  a  creditor, 
and  not  as  a  stockholder,  as  such  interest  was  merely  nominal  in 
comparison  with  his  interest  as  a  bondholder.  Said  Bowler  was 
re-elected  a  director  in  December,  1858,  and  was,  from  the  mo- 
ment of  his  first  election,  "from  his  known  capacity  as  a  man 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  471 

of  business,  financial  ability,  and  reputed  wealth,  a  leading 
member  of  the  Board  of  Directors ;"  that  he  used  his  influence 
with  the  other  members  of  said  Board,  with  the  view  to  embar- 
rass said  company  and  injure  its  credit,  and  bring  about  a  sale 
of  the  road ;  and  mainly  through  his  influence,  a  circular, 
known  as  the  t(  $800,000  circular,"  was  issued  and  sent  to  bond- 
holders ;  and,  mainly  through  his  influence,  the  directors  ceased 
making  efforts  to  pay  the  interest  on  the  bonds,  which  alarmed 
the  creditors,  and  caused  a  suit  to  be  brought  in  this  Court  for 
the  foreclosure  of  said  second  mortgage.  That  in  said  suit  there 
were  no  other  creditors  pressing  for  payment,  except  for  the 
interest  on  the  second  mortgage  bonds,  and  if  it  had  been  paid, 
no  sale  would  have  taken  place.  That  the  "$800,000  circular," 
otherwise  called  u  Proposition  to  Bondholders,"  alleged  that  it 
would  require  near  that  sum  to  put  the  road  in  complete  condi- 
tion, although  the  reports  of  the  Superintendent  for  the  years 
1857  and  1858  showed  that  no  such  expenditures  were  then  ad- 
visable or  necessary  ;  "  and  WILLIAM  II.  CLEMENT,  a  practical 
engineer  and  railroad  officer  of  great  experience,  being  then 
called  upon  by  the  officers  of  the  road,  estimated  the  amount 
necessary  to  complete  the  road,  renewal  of  bridges,  etc.,  at  from 
$131,840  to  $206,715,  and  other  competent  persons,  experienced 
in  railroad  management,  agreed  in  substance  therewith  ;  and  al- 
though the  said  '  Proposition  to  Bondholders'  named  'nearly 
$800,000'  as  necessary  to  'complete'  the  road,  Bowler,  and 
those  acting  with  him,  gave  out  to  the  creditors  substantially, 
that  near  that  amount  was  then  necessary  to  be  expended  on 
the  road,  and  proceeded  to  carry  out  the  terms  of  said  '  Propo- 
sition' by  stopping  the  payment  of  interest."  That  after  the 
leasing  of  the  road  between  Paris  and  Lexington,  it  was  not 
contemplated  to  finish  the  road  "  between  said  places,  and  neither 
the  alleged  estimates  in  said  '  Proposition,'  or  of  CLEMENT,  pro- 
posed any  expenditures  therefor.  And  plaintiff  now  avers,  that 
said  Bowler,  and  those  acting  with  him,  knew  that  the  proposed 
expenditures  mentioned  in  the  '  Proposition  to  Bondholders,' 
were  unnecessary  at  that  time.  That  the  said  l  Proposition '  was 
given  circulation  by  him  and  those  acting  with  him,  for  the  pur- 
pose of  embarrassing  the  affairs  of  the  plaintiff,  and  bringing  the 
road  to  sale,  so  that  he  might  become  the  purchaser  thereof,  or 


472  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

to  affect  the  value  of  the  securities  of  the  road,  so  as  to  enable 
him  to  make  large  profits  by  buying  up  the  same  at  low  prices, 
or  for  both,  and  all  such  purposes.  That  said  Bowler,  and  those 
acting  with  him,  could  have  prevented  the  sale  of  the  road,  by 
leasing  the  same,  or  by  themselves  managing  the  same  in  the 
interest  of  the  stockholders ;  but  said  Bowler  neither  desired  to 
prevent  the  sale  of  the  road  nor  to  manage  the  road  in  the  in- 
terest of  the  stockholders  or  for  their  benefit."  Afterward,  the 
interest  on  the  second  mortgage  bonds  was  not  paid  or  provided 
for  by  the  directors.  The  combined  effect  of  the  circular  and 
non-payment  of  the  interest  broke  down  the  credit  of  the  com- 
pany, and  greatly  depreciated  its  securities.  Said  Bowler  then 
entered  the  market  and  purchased,  at  a  heavy  discount,  a  large 
amount  of  the  second  and  third  mortgage  bonds. 

The  petition  further  alleged,  that  the  earnings  of  the  road  in 
the  year  1858  were  $437,579.02,  and  after  applying  $239,262.22 
to  operating  and  repairing  the  road,  left  $198,316.80  for  pay- 
ment of  interest,  construction,  etc.  That  for  eleven  months  and 
five  days  next  following  the  1st  of  November,  1858,  the  earnings 
were  $458,820.99,  which,  after  applying  $231,086.22  to  current 
running  expenses,  repairs,  and  stocking  the  road,  left  $227,734.77 
for  payment  of  interest,  etc.;  u  but  instead  of  applying  so  much  of 
the  net  earnings  of  the  road  to  the  interest  upon  the  second 
mortgage  bonds,  to  prevent  a  forfeiture  thereof,  it  was,  mainly 
through  the  agency  and  influence  of  said  Bowler,  unnecessarily 
and  wrongfully  applied  to  put  the  road  in  better  order  than  was 
strictly  necessary,  in  purchasing  rolling  stock  and  real  estate 
unnecessary  for  the  road,  and  still  remaining  unused  for  that 
purpose,  and  paying  claims  not  pressing  the  company,  and  by 
the  wrongful  application  of  the  means  of  said  road  aforesaid, 
permitted  a  forfeiture  of  two  of  said  mortgages  by  non-payment 
of  the  interest."  That  in  consequence  of  the  failure  to  pay  the 
interest  on  the  second  mortgage  bonds,  suit  was  brought  in  the 
Fayette  Circuit  Court,  Kentucky,  by  the  trustee  of  the  bond- 
holders, to  foreclose  the  second  mortgage,  and  in  August,  1859, 
a  judgment  of  foreclosure  was  suffered  to  be  entered  for  a  sale  of 
the  road,  and  on  the  5th  of  October  following,  the  commissioner 
of  said  court  accordingly  sold  the  road,  part  of  its  franchises, 
and  the  same  was  bid  off,  at  a  price  largely  less  than  its  full 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  473 

value,  by  William  H.  Gedge,  for  said  Bowler,  they  being,  at  the 
time,  directors  of  the  company.  That  the  bid  was  $2,125,000, 
but  by  the  terms  of  the  judgment  he  was  only  required  to  pay 
the  unpaid  interest,  and  to  keep  down  the  accruing  interest  on 
the  amount  of  the  indebtedness  of  the  road  covered  by  his  bid, 
and  to  pay  off  the  bonds  thereof  to  said  amount  as  they  matured, 
so  that  he  really  paid  only  a  small  amount  from  his  own  means. 
That  Bowler  took  possession  of  the  road,  and  derived  large 
profits  therefrom,  but  did  not  complete  any  or  only  inconsiderable 
parts  of  the  improvements  on  the  road  as  stated  to  be  neces- 
sary in  said  circular,  and  the  said  road,  when  sold,  was  in  as 
good  condition,  if  not  better,  than  it  was  at  the  time  of  filing  the 
petition,  or  at  any  time  after  the  sale  and  previous  thereto ;  and 
that  after  paying  interest  on  the  bonded  debt,  and  making  the 
investments  required  by  the  court,  he  applied  the  surplus  profits 
to  his  own  uses  and  purposes.  That  in  the  year  1860,  such 
individual  profits  amounted  to  the  sum  of  $80,000  or  upward ; 
and  in  the  following  year  said  Bowler  also  derived  large  profits 
therefrom,  the  actual  amount  of  which  plaintiff  is  unable  to 
state,  because  since  Bowler  took  possession  of  said  road  afore- 
said, he,  or  those  associated  with  him,  had  not  published  any 
account  of  the  earnings  of  the  road,  as  had  been  done  previous 
to  that  time.  That  on  the  1st  of  January,  1861,  said  Bowler 
constituted  a  joint-stock  company,  and  subject  to  the  mortgage 
securities  ordered  to  be  paid  by  the  terms  of  said  alleged  sale, 
amounting  to  $1,737,000,  divided  the  interest  he  claimed  in  the 
road  into  11,000  shares  at  $100  per  share,  and  transferred  the 
road  to  said  joint-stock  company  for  the  sum  of  $2,837,000,  or 
at  a  profit  of  $712,000  over  and  above  the  amount  of  his  alleged 
purchase  of  the  said  road.  That  in  said  company  John  T.  Levis 
took  twenty  shares  at  $100  per  share;  William  H.  Gedge  took 
twenty  shares  at  the  same  price ;  James  C.  Gedge  took  twenty 
shares  at  the  same  price ;  Richard  Stowers  took  twenty  shares 
at  the  same  price,  and  the  said  Bowler  retained  the  balance  of 
the  stock  at  the  same  relative  price.  That  said  William  H. 
Gedge  and  John  T.  Levis  were  directors  of  said  road  at  the 
time  of  issuing  of  said  circular  as  aforesaid,  and  when  said  road 
was  brought  to  sale  as  aforesaid,  and  at  the  time  of  the  alleged 
sale.  And  Richard  Stowers  was  a  director,  elected  on  the  15th 


474  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

of  December,  1859,  and  was  such  director  at  the  time  of  taking 
such  shares,  and  so  continued  to  be  at  the  filing  of  the  petition. 
That  none  of  said  parties  paid  any  consideration  for  the  said 
stock,  and  that  at  the  time  of  accepting  such  stock  they  and  each 
of  them  had  full  knowledge  of  the  equities  of  the  plaintiff  as 
herein  set  forth.  That  in  the  year  1862,  the  said  company  di- 
vided a  dividend  from  net  earnings,  being  the  profits  at  six  per 
cent  on  the  said  stock,  of  $1,100,000.  Subsequently,  on  the  1st 
of  January,  18G3,  said  Bowler  and  Susan  L.  Bowler,  his  wife, 
conveyed  the  said  railroad  to  William  Ernst  and  Q.  A.  Keith  in 
trust  for  the  parties  aforesaid  (except  the  said  John  T.  Levis, 
who  withdrew),  and  A.  Hathaway,  John  W.  Stevenson,  and  Wm. 
Ernst,  according  to  certain  interests  of  said  parties,  by  them 
respectively  held,  or  contemplated  to  be  held,  by  said  parties. 
That  at  that  time  the  road  was  as  valuable,  if  not.more  valuable, 
than  at  the  time  of  the  formation  of  said  joint-stock  company  ; 
and  the  said  parties  had  full  notice  and  knowledge  of  the 
equities  and  claims  of  plaintiff  to  said  property,  and  took  am- 
ple security  for  payments  by  them  made  on  account  of  their 
several  interests  (if  they  did  make  any  such  advances) ;  and 
plaintiff  charged  that  portions  of  the  alleged  considerations  for 
such  conveyance  were  not  made  as  alleged  therein.  That  the 
said  parties  and  said  Bowler,  and  since  his  death  his  estate, 
have  made  and  derived  large  profits  from  the  running  of  said 
road  and  the  earnings  thereof.  That  the  amount  of  the  earnings 
of  the  road,  for  the  year  1859,  were  not  made  known  prior  to 
the  annual  report  on  the  loth  of  December,  1859,  and  that  the 
several  frauds  and  maladministrations  of  Bowler,  were  not  dis- 
covered by  or  known  to  plaintiff  until  the  month  of  January, 
1865,  or  about  that  time.  That  up  to  the  time  of  the  election 
of  directors,  in  December,  1859,  the  directory  of  the  road  was 
under  the  influence  of  Bowler,  and  the  stockholders  could  not 
make  any  effectual  opposition  to  said  sale  or  prevent  the  same, 
and  that  it  was  the  duty  of  the  directors  of  the  road  to  so  man- 
age the  road  and  its  means  as  to  prevent  a  sacrifice  of  the 
property  of  the  plaintiff,  and  not  shift  their  duties  or  liabilities 
upon  individual  stockholders,  who  had  no  power  to  control  the 
road  or  its  means.  That  the  said  Robert  B.  Bowler  was  a  non- 
resident of  the  State,  and  that  he  died  on  the  4th  of  July,  1864, 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  475 

intestate,  in  the  county  of  Hamilton,  State  of  Ohio,  where  he 
resided.  That  administration  on  his  estate  had  been  granted  in 
Kenton  County,  to  Eli  C.  Baldwin,  on  the  13th  of  February, 
1865.  That  he  left  a  widow  and  children,  naming  them,  also 
resident  in  Ohio.  That  on  the  15th  of  December,  1859,  the 
stockholders,  at  their  annual  meeting,  elected  Joseph  Shawhan, 
Alexander  L.  Greer,  Brutus  J.  Clay,  C.  D.  Carr,  George  H. 
Perrin,  Richard  Stowers,  E.  T.  Clarkson,  Peter  Zinn,  and 
William  Lisle,  Directors ;  and  the  Board  elected  Jos.  Shawhan, 
President,  and  A.  L.  Greer,  Vice-President ;  and  part  of  the 
said  persons  (with  others  who  have  been  chosen  directors  in 
place  of  some  who  have  ceased  to  be  directors),  were  then  the 
directors  of  said  corporation,  and  were  a  body  corporate  by  the 
name  of  the  Covington  and  Lexington  Railroad  Company. 

Plaintiff  prayed  that  the  purchase  by  Bowler  of  said  prop- 
erty, under  the  order  of  the  Fayette  Circuit  Court  as  afore- 
said, might  be  set  aside  and  adjudged  null  and  void,  or  held  to 
inure  to  the  benefit  of  the  plaintiff,  and  all  conveyances,  or 
rights  acquired  under  the  same,  declared  null  and  void,  or  held 
to  inure  as  aforesaid.  That  the  heirs  and  legal  representatives 
of  said  Bowler  might  be  held  to  account  for  the  profits  made  on 
the  bonds  of  said  road,  bought  up  by  said  Bowler  while  he  was 
a  director,  with  the  intention  of  bringing  the  same  to  sale  or 
making  profit  thereon,  or  that  were  purchased  after  the  said 
sale  for  the  purpose  of  preventing  action  for  the  recovery  of  the 
road ;  and  if  said  account  is  not  ordered,  then  that  the  estate 
of  said  deceased,  on  final  settlement,  be  allowed  only  the  actual 
costs  of  such  bonds,  and  not  the  full  amount  thereof.  That  said 
Bowler's  representatives,  or  those  claiming  under  him  or  them, 
might  be  held  as  trustees  for  plaintiff,  and  that  the  plaintiff 
might  be  subrogated  to  all  claims  of  said  Bowler,  his  heirs,  rep- 
resentatives, and  assigns,  or  those  claiming  under  them  |  and 
that  an  account  might  be  taken  of  the  earnings  of  the  road 
since  the  same  passed  into  the  possession  of  Bowler;  and  that 
defendants  might  be  required  to  account  for  the  earnings  of  the 
road,  and  also  for  loss  and  deterioration  of  property.  That  the 
road,  and  every  thing  belonging  to,  or  connected  therewith, 
should  be  surrendered  to  plaintiff,  and  that  the  plaintiff  might 
be  restored  to  all  it  had  lost  by  reason  of  said  sale.  And 


476  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

if,  upon  a  hearing,  it  should  be  deemed  necessary  to  order 
a  resale,  or  that  any  terms  should  be  imposed  before  setting 
aside  the  sale,  plaintiff  made  tender,  in  either  case,  to  comply 
therewith.  And  plaintiff  also  prayed  for  general  relief  (a). 

The  defendants,  resident  in  Kentucky,  were  served  with 
process ;  and  as  to  those  non-resident,  the  widow  and  heirs  of 
Bowler,  together  with  the  trustees  of  the  first,  second,  and  third 
mortgage  bonds,  a  warning  order  was  issued,  and  CHARLES  H. 
FISK,  Esq.,  was  appointed  attorney  to  defend  for  them. 

On  the  4th  of  January,  1867,  the  administrator  of  Bowler  made 
and  filed  an  affidavit,  setting  forth  the  sale  under  the  judgment 
of  the  Fayette  Circuit  Court,  and  alleging  that  thereby  all  rights 
and  franchises  of  the  plaintiff  had  passed,  and  the  corporation 
became  extinct.  On  this  a  rule  issued  to  plaintiff's  attorneys, 
requiring  them  to  show  by  what  authority  the  suit  was  brought. 
A  response  was  filed;  and  at  the  December  term  following,  Hon. 
JOSEPH  DONIPHAN,  then  presiding  judge,  delivered  his  judg- 
ment, that  the  sale  did  not  extinguish  the  corporation,  and  that 
the  plaintiff  had  the  right  to  ll  inquire  into  the  conduct  of  the 
former  officers  of  the  company.''  That  an  individual  could 

(a)  The  Articles  of  Association  of  the  Joint  Stock  Company,  together  with 
the  Declaration  of  Trust,  and  Deed  of  Trust  to  Ernst  and  Keith,  referred  to  in 
the  Petition,  and  as  recorded  in  the  records  of  Kenton  County,  were  made 
Exhibits  thereto.  The  Deed  of  Trust  bears  date  the  30th  of  January,  1863, 
and  recites  the  receipt  by  Bowler  of  $36,000  from  A.  Hathaway  for  Q.  A. 
Keith,  $24.000  from  W.  H.  and  J.  C.  Gedge,  $24,000  from  Wm.  Ernst,  $24,000 
from  John  W.  Stevenson,  and  $2,000  from  Richard  Stowers,  and  the  forma- 
tion by  them  of  a  joint-stock  company,  to  be  known  as  the  "Kentucky  Cen- 
tral Railroad  Company."  They  assumed  to  pay  the  balance  due  on  the  pur- 
chase of  the  road  and  perform  Bowler's  obligations  relating  thereto,  and  he 
covenanted  to  repay  to  the  parties  the  principal  and  interest  of  the  moneys  so 
advanced,  if  the  road  was  taken  from  the  company  by  other  means  than  the 
failure  to  meet  the  assumption  aforesaid;  but  said  parties  released  his  general 
estate  from  any  liability  therefor,  and  were  to  look  for  indemnity  to  Bowler's 
interest  in  the  road  alone. 

The  "$800,000  circular,"  or  "Proposition  to  Bondholders,"  was  also  mnde 
an  Exhibit;  and  as  much  importance  was  given  to  it  by  counsel  on  both  sides, 
it  will  be  found  in  full  in  an  Abstract  of.  the  Minutes  of  the  Board  of  Directors,  ex- 
tracts  from  which  Minutes  were  offered  in  evidence  by  both  parties. 

A  Transcript  of  the  Proceedings  in  the  Foreclosure  Suit,  in  the  Fayette  Circuit 
Court,  up  to  and  including  the  confirmation  of  the  sale,  was  also  made  an  Ex- 
hibit to  the  Petition. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  477 

maintain  a  similar  suit,  and  consequently  a  corporation  could  do 
the  same ;  and  the  defendants  were  required  to  answer. 

Further  delay  ensued,  in  rulings  and  discussions  as  to  what 
part  of  the  record  of  the  proceedings  in  the  Fayette  Circuit 
Court  (wherein  the  sale  was  made)  should  be  filed  by  the  plain- 
tiff, as  an  exhibit  to  its  petition.  And  finally,  on  the  last  day 
allowed  by^the  court  therefor,  the  20th  of  November,  1868,  the 
defendants,  Q.  A.  Keith,  A.  Hathaway,  Win.  Ernst,  John  W. 
Stevenson,  Eli  C.  Baldwin,  as  administrators  of  Robert  B. 
Bowler,  and  Jas.  C.  Gedge,  filed  a  demurrer  to  the  petition, 
and  alleged  as  causes  of  demurrer,  1.  That  the  court  had  no 
jurisdiction  of  the  action ;  2  and  3.  Defect  of  parties  plaintiff 
and  defendants ;  4.  Want  of  capacity  in  plaintiff  to  sue ;  and, 
5.  That  the  petition  did  not  state  a  good  cause  of  action.  This 
demurrer  was  overruled  by  Hon.  JOHN  W.  MENZIES,  Special 
Judge. 

On  the  same  day,  the  same  parties  filed  an  answer,  occupy- 
ing twenty-nine  pages  of  the  printed  record. 

ABSTRACT  OF  DEFENDANTS'  ANSWER. 

PARAGRAPH  I.  Set  up  the  foreclosure  proceedings  in  the 
Fayette  Circuit  Court,  and  alleged  that  plaintiff  took  no  appeal 
therefrom,  but  submitted  to  the  judgment  of  said  Court,  and 
that  thereby  the  road  and  all  its  franchises  were  sold  to  Bowler, 
and  the  sale  confirmed ;  and  that  the  defendants  were  then 
running  the  road  under  the  supervision  of  said  Court,  under  its 
authority,  and  under  the  terms  of  the  sale  and  confirmation,  the 
material  part  of  which  is  contained  in  this  extract  therefrom : 

"This  Court  reserves  full  power,  by  summary  proceedings  against  the  pur- 
chaser to  enforce  the  compliance  with  all  the  terms  of  sale,  and  until  full  pay- 
ment therefor,  to  coerce  said  purchaser  to  keep  all  the  property  purchased  in 
good  repair  and  order,  so  as  to  do  the  business  of  the  railroad  with  safety  and 
dispatch ;  and  in  case  of  default  on  the  part  of  the  purchaser  in  making  pay- 
men  t,  or  in  complying  with  any  of  the  terms  of  sale,  or  in  keeping  the  property 
in  good  order  and  repair,  may  appoint  a  reviewer  or  order  a  sale  thereof;  and  it 
is  hereby  ordered  that  there  shall  be  a  lien  upon  all  the  property,  rights,  and 
franchises  sold,  and  upon  all  the  income  accruing  therefrom,  for  a  full  and 
complete  compliance  with  the  terms  of  said  sale." 

That  the  Fayette  Circuit  Court  was  then,  from  term  to  term, 
enforcing  the  terms  of  said  judgment ;  and  for  that  purpose  held 


478  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

the  road  in  trust ;  and  that,  therefore,  the  Kenton  Circuit  Court 
had  no  jurisdiction  of  the  case,  but  that  such  jurisdiction,  if 
any,  was  in  the  Fayette  Circuit  Court. 

PAR.  II.  After  reciting  the  matters  set  forth  in  the  preced- 
ing paragraph,  it  is  plead  that  the  "  plaintiff  is  barred  and 
estopped  by  the  record  and  judgment  of  the  Fayette  Circuit 
Court,  and  by  the  order  in  said  cause  confirming  the  %ale  of  said 
road  to  Bowler,"  and  that  the  same  could  not  be  questioned  in 
any  court. 

PAR.  III.  This  paragraph  is  quite  lengthy,  and  puts  in  issue 
most  of  the  material  allegations  of  the  petition  which  set  forth 
causes  for  equitable  relief.  The  defendants  denied  that  the  road 
was  finished  to  Paris,  and  averred  that  it  needed  ballasting  at 
the  time  of  the  sale.  They  averred  that  the  annual  reports  of 
1857  and  1858  stated  that  the  income  of  the  road  was  insuffi- 
cient to  run  and  stock  the  road,  keep  it  in  repair,  and  pay  in- 
terest on  its  indebtedness,  and  that  these  reports  were  unani- 
mously adopted  by  the  stockholders  of  the  company.  They  de- 
nied the  allegations  as  to  the  purpose  of  Bowler  in  becoming  a 
director,  as  well  as  his  intentions  and  purposes  in  purchasing 
the  bonds  of  the  company,  but  averred  his  right  so  to  do ;  de- 
nied his  ever  using  his  influence  to  embarrass  the  company  or 
to  destroy  its  credit,  or  to  bring  it  to  sale,  or  that  the  tl  $800,000 
circular"  was  issued  mainly  through  his  influence,  and  that  it 
broke  down  the  credit  of  the  company.  They  aver  that  it  was 
the  "most  feasible  and  proper"  plan  to  enable  the  company  to 
complete,  repair,  and  equip  the  road ;  and  that  it  was  adopted 
with  no  other  view  on  the  part  of  Bowler  than  set  forth  in  the 
circular  itself.  That  the  bonds  were  payable  to  bearer,  and 
those  purchased  by  Bowler  were  not  purchased  from  the  com- 
pany, but  from  other  parties ;  and  if  so  bought  at  heavy  dis- 
counts, he  had  a  right  so  to  do.  That  after  the  foreclosure  suit 
was  commenced,  Bowler  exerted  himself  to  li  defend  the  action 
and  resist  a  judgment  for  the  sale."  That  Bowler,  in  good 
faith,  believed  the  "  $800,000  circular  "  the  only  feasible  plan  to 
relieve  the  road  from  its  embarrassments,  and  as  evidence 
thereof,  made  an  exhibit  of  a  letter  written  by  him  to  T.  D. 
Carneal,  and  published  in  the  Cincinnati  Gazette,  August  28, 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  479 

1858  (a).  That  the  action  of  the  directors  in  ceasing  to  pay 
interest  on  the  $200,000  guaranteed  by  the  city  of  Covington, 
$50,000  of  the  bonds  of  Pendleton  County,  $100,000  issued 
to  the  city  of  Cincinnati;  and  $520,500  income  bonds,  on  the 
18th  of  November,  1857,  was  reported  to  the  stockholders,  and 
unanimously  approved  by  them ;  as  was  also  the  suspension  of 
interest  on  the  second  and  third  mortgage  bonds  likewise  re- 
ported and  approved  :  And  defendants  aver  that  the  plaintiff  is 
estopped  thereby.  Defendants  aver  that  the  annual  interest  ac- 
cruing in  1857,  1858,  and  1859,  was  $213,750  per  annum;  that 
it  had  not  been  paid  for  some  time,  and  at  the  time  of  the  sale 
of  the  road  the  debt  due  and  maturing  within  a  few  months 
amounted  to  $1,000,000  and  upward;  and  denied  that  any  part 
of  the  earnings  of  the  road  were  applied  to  unnecessary  im- 
provements thereon,  or  to  the  payment  of  claims  not  pressing 
on  the  company.  They  denied  that  the  interest  on  the  second 
mortgage  bonds  alone  was  pressing  for  payment ;  that  Bowler 
was  chargeable  as  a  trustee  in  making  the  purchase  of  the 
road  ;  and  averred  that  he  was  a  large  creditor,  and  had  the 
right  to  purchase  the  road  to  protect  himself.  That  notwith- 
standing he  bought  the  road  for  himself,  he  offered  to  return  it  to 
the  company,  and  neither  the  stockholders  or  the  plaintiff  would 

(a)  A  writer  in  the  Frankfort  Commonwealth,  signing  himself  "One  of  the 
Bondholders,"  had  taken  exception  to  the  terms  of  the  circular;  and  Mr. 
Bowler's  letter  purported  to  be  a  defense  thereof.  Among  other  statements,  he 
says:  "The  Report  of  1857  shows  that  the  road  finished  to  Paris,  according  to 
the  estimates  "  of  R.  M.  Shoemaker,  engineer,  and  under  him,  "  cost  $2,81 6,938,  or 
$35,211  per  mile,  differing  from  the  estimate  only  $170  per  mile.  Even  this  esti- 
mate was  too  low,  for  it-is  a  notorious  fact  that  not  a  contractor  on  the  road  made 
any  thing,  while  a  large  majority  sustained  heavy  loss."  "This  road,  from  the 
time  of  its  opening,  hns  steadily  increased  each  year.  It  was  open  to  Lexington 
in  December,  1855.  The  [net]  earnings  for  the  year  were  $138,694;  the  in- 
crease the  next  year  was  $40,248,  and  in  1857,  last  year,  the  increase  over  this 
was  $26,460;  and  the  superintendent  tells  you,  had  the  company  the  equipment 
to  do  the  business,  the  increase  would  have  been  greater  than  the  preceding  year. 
As  fast  as  it.  could  add  to  its  equipment  in  its  crippled  condition,  it  has  done  so, 
and  the  receipts  show  the  advantage  of  every  additional  car;  and  up  to  this  time, 
when  nearly  every  road  in  the  United  Stales  continues  to  fall  off,  this  road  not 
only  maintains  its  earnings,  but  shows  a  gradual  increase." 

Speaking  of  the  directors,  Mr.  Bowler  says:  "As  the  immediate  repre- 
sentatives of  the  stockholders,  they  will  make  every  exertion  to  preserve  for  them 
and  their  posterity  this  valuable  property,  at  the  same  time  not  losing  sight  of 
the  interest  of  the  bondholders." 


u,s., 


480  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  A 

accept  his  offer.  They  denied  that  the  improvement  of  the  road 
was  stopped  after  its  sale,  and  aver  that  $1,000,000  has  been 
so  applied.  They  deny  the  statements  of  the  petition  as  to 
profits  made  by  Bowler  and  the  defendants,  in  sales  of  interests 
in  the  road  or  otherwise;  and  that  the  directory  in  1859,  or 
previously,  was  under  the  influence  of  Bowler. 

PAR.  IV.  Defendants  denied  that  any  frauds  of  Bowler  ever 
existed,  or  that  any  alleged  frauds  were  not  discovered  until 
January,  1865.  They  averred  that  the  stockholders  had  knowl- 
edge, at  all  times,  of  all  that  had  been  done  previous  and  after 
the  sale ;  and  that  at  the  annual  meeting  on  the  22d  of  Decem- 
ber, 1859,  they  had  knowledge  that  Bowler  claimed  the  road 
absolutely  as  his  own ;  and  therefore  plead  that  no  cause  of  ac- 
tion had  accrued  to  the  plaintiff  five  years  next  before  the  in- 
stitution of  the  suit,  and  that  the  same  was  barred  under  sec.  2, 
art.  3,  ch.  63,  of  the  Revised  Statutes  of  Kentucky. 

PAR.  V.  Defendants  averred  that  Bowler  took  possession 
of  the  road  in  October,  1859,  as  and  for  his  own,  and  that  he 
and  the  defendants,  claiming  under  him,  have  since  had  exclu- 
sive adverse  possession  thereof;  and  therefore  they  plead  in  bar 
the  same  section  referred  to  in  the  previous  paragraph,  which 
they  aver  "  declares  that  action  for  the  recovery  of  specific 
personal  property,  or  for  profit  therein,  or  damage  for  withhold- 
ing the  same,  shall  commence  within  five  years  after  the  cause 
of  action  accrued,  and  not  afterward." 

PAR.  VI.  In  this  paragraph  it  was  averred  that  the  alleged 
grievances  set  up  in  the  petition  were  all  known  to  the  plain- 
tiff previous  to  the  judgment  for  sale  ordered  in  the  Fayette 
Circuit  Court ;  that  the  plaintiff  was  a  party  thereto,  and  did 
not  set  up  the  same  therein,  and  that  by  reason  thereof  "  the 
plaintiff  is  barred  and  estopped  to  set  up  said  several  matters  in 
this  action."  . 

PAR.  VII.  Defendants,  Ernst,  Hathaway,  James  C.  Gedge, 
and  Stevenson,  set  up  that  they  are  innocent  purchasers,  for  a 
valuable  consideration,  of  near  one-half  of  the  railroad  from 
Bowler;  that  they  knew  nothing  of  the  alleged  frauds  charged 
against  him,  and  deny  that  their  interests  can  be  affected  by 
any  suit  against,  or  frauds  committed  by  him. 

PAR.  VIII.    General  plea  of  statute  of  limitations  of  five  years. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  481 

PAR.  IX.  In  this  paragraph  it  is  averred  "that  the  plain- 
tiff, at  the  time  of  the  sale  to  Bowler  aforementioned,  was  ut- 
terly insolvent ;"  and  after  producing  statistics  in  proof  thereof, 
it  is  further  alleged  "that  plaintiff,  being  dissolved  and  dead," 
had  no  "legal  or  equitable  right  or  interest  that  enables  them 
to  maintain  this  suit. 

PAR.  X.  This  paragraph  sets  forth  that  the  plaintiff  is  not 
a  corporation,  and  can  not  sue.  It  raises  the  same  point  passed 
upon  by  Judge  DONIPHAN. 

PAR.  XI.  This  is  a  general  resume  of  all  the  defenses  set 
forth  in  the  previous  paragraphs,  raising  questions  of  fact.  It 
was  drawn,  and  no  doubt  intended,  to  cover  every  point  of  de- 
fense that  might  have  been  overlooked  in  the  preceding  ten 
paragraphs. 

The  plaintiff  demurred  to.  Paragraphs  I,  II,  IV,  V,  VI, 
VIII,  and  IX,  of  this  Answer,  and  for  causes  of  demurrer 
averred  "  that  neither  of  said  paragraphs,  severally  or  jointly, 
or  any  part  or  parts  thereof,  constituted  a  good  or  sufficient  de- 
fense to  bar  the  action  of  the  plaintiff,  or  to  the  relief  asked 
for  in  the  petition."  After  an  extended  argument  by  counsel 
on  both  sides,  this  demurrer  was  sustained,  except  as  to  Para- 
graph VIII,  as  to  which  it  was  overruled. 

On  the  23d  of  March,  1870,  a  FIRST  AMENDED  ANSWER 
was  filed  by  the  defendants.  This  answer  was  a  restating  of 
the  matters  set  forth  in  Paragraphs  I  and  II,  and  adding  thereto, 
as  an  exhibit,  a  large  printed  volume  of  820  octavo  pages,  con- 
taining the  entire  proceedings,  testimony,  and  exhibits  in  the 
Foreclosure  Suit,  and  all  other  actions  growing  out  of  the  same, 
one  of  which  alone,  that  of  Vallette  v.  Botvler,  occupying  two- 
thirds  of  this  volume.  Plaintiff  filed  exceptions  to  this  Exhibit ; 
and  that  part  subsequent  in  date  to  the  confirmation  of  the  sale 
of  the  road  was  ruled  out  by  the  court.  This  left  the  proceed- 
ings on  foreclosure  only. 

On  the  20th  of  September,  1870,  defendants  filed  a  SECOND 
AMENDED  ANSWER,  and  filed  therewith,  as  a  part  thereof,  a  Card 
of  R.  B.  Bowler,  published  in  the  Cincinnati  Gazette  of  No- 
vember 10,  1859,  "offering  to  return  the  road  to  the  stock- 
holders upon  being  reimbursed  his  outlay,  and  relieved  from  his 

31 


482  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

bonds  in  the  Fayette  Circuit  Court."  Also,  his  Card  published 
in  the  same  paper,  "December  17,  1859,  calling  the  attention 
of  the  stockholders  of  said  company  to  his  former  proposition  to 
return  said  road  to  them,  and  requiring  an  acceptance  or  rejection 
of  his  offer  on  or  before  the  annual  meeting  of  the  stockholders 
of  said  company,  to  be  held  in  the  city  of  Covington,  Kentucky, 
on  the  22d  of  December,  1859."  It  was  averred  that  these 
offers  to  return  the  road  were  refused  by  the  stockholders,  and 
therefore  the  defendants  prayed  that  plaintiff's  petition  should 
be  dismissed  (a). 

(a) Each  of  said  Cards  was  addressed  to  the  "Editors  of  the  Gazette."  The 
first  one  is  lengthy,  and  all  in  it  having  any  reference  to  the  restoration  of  the 
road  to  the  stockholders  is  embraced  in  this  extract: 

"  I  shall  be  happy  to  restore  the  road  again  to  the  stockholders.  First  ap- 
point this  committee  [to  investigate],  have  a  rigid  and  fair  examination,  and  see 
if  I  obtained  it  with  any  of  their  money.  When  satisfied  I  did  not,  let  the  same 
committee  examine  my  books  and  vouchers,  and  see  what  I  really  did  give  for 
the  securities  of  the  company,  then  reimburse  me  for  the  capital,  with  six  per  cent 
interest,  relieve  me  from  the  securities  before  the  court,  and  take  the  property. 
If  they  won't  do  this,  I  beg  that  they  will  permit  me  to  dispose  of  it  as  I  please. 

"  K.  B.  BOWLER." 

SECOND    CARD    OF    R.  B.  BOWLER. 

Editors  Gazette, — Do  you  not  think  that  you,  and  those  stockholders  you  rep- 
resent, have  in  your  article  of  yesterday  done  me  injustice?  If  they  do  not  in- 
tend to  accept  my  offer,  it  is  unfair  to  make  insinuations.  My  proposition  is 
plain  and  distinct.  They  are  not  required  to  pay  what  I  or  my  books  state  to 
be  the  cost  of  the  securities,  but  for  the  vouchers  which  I  produce,  and  these 
with  only  six  per  cent  interest.  This  remark  was  appended  to  the  original  offer: 
"If  they  won't  do  this,  I  beg  that  they  will  permit  me  to  dispose  of  it  as  I  please." 
Now,  all  that  I  ask  is,  that  they  do  one  or  the  other,  and  that  speedily.  I  do  not 
care  which,  as  I  can  not  hold  such  a  property  in  abeyance.  The  Commissioner's 
books  show  the  securities  I  hold.  The  deferred  consist  of 

Third  Mortgage $263,000 

Incomes, 276,000 

Coupons, 93,335 

Stock, 165,000 


Total, -    .        .    $797,335 

This  amount  receives  no  dividend  from  the  proceeds  of  the  sale  of  the  road. 
Whatever  it  can  be  shown  that  these  securities  have  actually  cost  me,  with  in- 
terest at  six  per  cent,  must  be  paid,  in  addition  to  the  $2,125,000  the  road  brought. 
There  are  very  considerable  outlays  to  be  made  in  repairs,  which  should  not 
be  delayed.  If  they  intend  to  take  the  road,  I  can  not  lay  out  any  more  money 
upon  it.  Hence,  I  should  have  a  definite  answer — not  such  an  article  as  ap- 
peared in  your  paper  yesterday.  I  will  hold  the  offer  open  until  the  regular 
annual  meeting  of  the  stockholders,  which  takes  place  next  Thursday,  the  22d 
instant.  If  not  then  accepted,  it  is  finally  closed.  I  shall  then  proceed  to  make 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  483 

The  orders  and  rulings  of  the  court  were  severally  excepted 
to  by  the  party  against  which  they  were  made. 

EVIDENCE   IN  THE   CASE. 
MINUTES  OF  THE  BOARD  OF  DIRECTORS. 

The  plaintiff  and  defendants  offered  in  evidence  various  ex- 
tracts from  the  Minutes  of  the  Board  of  Directors  of  the  Cov- 
ington  and  Lexington  Railroad  Company,  which  are  here  con- 
densed and  extracted  from,  to  such  an  extent  as  space  permits. 
To  make  them  the  better  understood,  they  are  given  in  the  or- 
der of  their  respective  dates  ;  and  to  avoid  repetition,  no  men- 
tion is  made  as  to  which  party  offered  the  different  parts  of  the 
minutes. 

At  a  meeting  of  the  Board  of  Directors,  held  in  Covington  (a), 
July  6th,  1854,  at  which  were  present  M.  M.  BENTON,  President, 
and  Messrs.  J.  B.  CASEY,  F.  Gr.  GEDGE,  J.  T.  LEVIS,  A.  ROB- 
BINS,  and  C.  A.  WITHERS,  Directors,  the  following  order  was 
made  directing  the 

ISSUING  OF  "INCOME  BONDS." — Whereas,  owing  to  the  difficulties  in  negotiat- 
ing the  seven  per  cent  thirty-year  bonds  of  the  company,  arising  from  the  strin- 
gency in  the  market  and  the  high  rates  of  interest  now  prevalent,  it  is  believed 
by  this  Board  to  be  good  policy  to  issue  bonds  of  a  less  denomination,  maturing 
at  an  earlier  period,  and  bearing  a  greater  rate  of  interest.  It  is  therefore  or- 
dered, that  there  be  issued  four  hundred  bonds  of  this  company  of  the  denomina- 
tion of  five  hundred  dollars,  redeemable  five  years  after  date,  bearing  interest  at 
the  rate  of  ten  per  cent  per  annum,  payable  semi-annually,  one-half  at  the  Paris 
Branch  of  the  Northern  Bank  of  Kentucky,  and  the  other  half  at  the  Covington 
Branch  of  the  Farmers'  Bank  of  Kentucky,  with  coupons  attached.  Ordered, 
that  all  the  property,  rights,  credits,  privilegee,  franchises,  and  income  of  this 

the  permanent  repairs  of  the  road.  I  hope  that  every  stockholder  will  attend 
that  meeting.  Insinuations  have  been  made,  in  the  prints,  since  the  sale  of  the 
road,  signed  "  Stockholder,"  charging  that  the  Directory  connived  at  the  sale. 
The  Directory,  through  the  papers,  and  by  a  circular  addressed  to  every  stock- 
holder, demanded  a  committee  of  investigation.  No  one  responded. 

At  the  annual  meeting  next  Thursday,  full,  thorough,  and  complete  reports, 
in  minute  detail,  will  be  placed  before  the  stockholders,  of  the  condition  of  the 
company  up  to  the  day  of  sale.  R.  B.  BOWLER. 

(a)  It  is  proper  to  say,  that  all  the  meetings  of  the  Board  were  held  in  Cov- 
ington, where  the  shops  of  the  company  were  situate.  At  the  time  of  the  com- 
mencement of  the  foreclosure  suit  in  Fayette  County,  at  Lexington,  the  company 
had  no  properly  within  the  jurisdiction  of  the  Fayette  Circuit  Court,  except  the 
graded  part  of  the  road  within  that  county. 


484  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

company  be,  and  the  same  is  hereby,  irrevocably  pledged  to  the  payment  of  the 
interest  and  redemption  of  the  principal  of  the  said  bonds. 

At  a  meeting  of  the  Board  on  the  6th  of  November,  1854, 
the  same  parties  were  present. 

SECURITY  FOR  THE  DIRECTORS'  DEBT. — It  was  ordered  that,  whereas,  M.  M. 
Benlon,  John  B.  Casey,  F.  G.  Gedge,  S.  J.  Walker,  Charles  A.  Withers,  John  T. 
Levis,  and  A.  Bobbins  have  become  bound  for  large  sums  of  money  for  the  ben- 
efit of  this  company,  as  indorsers,  drawers,  and  acceptors  of  bills  of  exchange, 
drafts,  notes,  bonds,  and  other  evidences  of  debt,  to  several  banks  of  Kentucky 
and  elsewhere,  and  to  sundry  individuals  and  corporations,  and  to  secure  such 
liabilities  to  the  Kentucky  banks,  have  executed  mortgages  upon  their  individual 
estates  to  secure  the  same.  Now,  therefore,  to  secure  and  fully  save  harmless 
said  parties,  it  is  hereby  ordered  that  a  deed  of  mortgage  be  executed  and  deliv- 
ered unto  said  Benton,  Casey,  Gedge,  Walker,  Withers,  Levis,  and  Bobbins  upon 
all  the  estates,  rights,  credits,  franchises,  incomes,  receipts,  rents,  profits,  and 
property  of  said  company  of  every  kind  and  description,  conditioned  to  fully  se- 
cure and  save  harmless  said  parties  from  all  damages,  detriment,  losses,  expenses, 
charges,  and  money,  sustained,  endured,  borne,  or  paid  for  or  on  account  of  this 
company,  or  growing  out  of  or  arising  from  said  liabilities,  and  further  condi- 
tioned that  if  the  company  make  default  or  fail  in  any  respect,  to  indemnify  and 
save  harmless  said  parties  on  account  of  said  liabilities,  the  said  Benton,  Casey, 
Withers,  Walker,  Gedge,  Levis,  and  Bobbins  may  take  possession  of  said  property, 
and  use  and  employ  the  same  to  repay  nnd  reimburse  them  from  all  damages, 
losses,  expenditures,  charges,  and  payments,  as  then  made  or  endured  on  said  ac- 
count, and  to  pay  all  expenses  of  running  and  using  the  road  and  property,  and 
all  improvements  and  repairs  of  the  same,  and  keep  and  retain  the  same  until 
said  parties,  and  each  of  them,  are  fully  reimbursed  and  released  and  satisfied 
for  all  payments,  losses,  damages,  charges,  and  detriments  endured  and  sustained 
aforesaid. 

At  the  same  meeting,  attorneys  were  directed  to  be  em- 
ployed on  behalf  of  the  company,  among  whom  was  Hon.  J.  W. 
STEVENSON. 

At  a  meeting  of  the  Board,  July  5, 1855,  it  was  ordered,  that  the  six  hundred 
bonds  [third  mortgage]  executed  by  this  company,  bearing  date  June  1st,  1855, 
payable  to  James  Winslow,  or  order,  thirty  years  after  date,  bearing  seven  per 
cent  interest,  payable  semi-annually  at  the  Bank  of  America  in  New  York,  and 
secured  by  mortgage  on  the  road,  be,  and  the  same  are  hereby,  transferred  and 
delivered  unto  M.  M.  Benton,  John  T.  Levis,  and  John  B.  Casey,  in  trust  to  be 
sold  and  disposed  of  to  pay  such  debts  of  this  company  as  they  or  A.  Bobbins,  C. 
A.  Withers,  S.  J.  Walker,  John  Chownings,  Thomas  Garnett,  are  personally  bound 
for,  and  for  no  other  purpose,  unless  it  becomes  necessary  to  pay  the  ensuing 
September  interest  of  this  company. 

At  a  meeting  of  the  Board,  held  December  13,  1855,  M.  M. 
BENTON,  President,  C.  A.  WITHERS,  J.  T.  LEVIS,  J.  CHOWN- 
INGS, J.  B.  CASEY,  T.  GARNETT,  A.  BOBBINS,  and  E.  OLDHAM, 
Directors,  were  present. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  485 

Messrs.  Casey,  Levis,  and  Benton,  to  whom  had  been  transferred  the  six  hun- 
dred third  mortgage  bonds  of  this  company,  of  the  denomination  of  one  thousand 
dollars  each,  to  pay  off  the  debt  of  this  company,  for  which  individuals  are  liable, 
reported  that  they  had  sold  the  six  hundred  bonds  unto  J.  W.  Walker,  at  fifty 
cents  to  the  dollar,  and  he  to  assume  and  pay  that  amount  on  the  debts  which  are 
enumerated  and  scheduled,  agreed  upon  and  embraced  in  a  contract  with  him, 
and  that  they  had  taken  a  mortgage  on  property  to  secure  the  payment  thereof. 
Also  hold  a  lien  on  the  said  bonds,  to  further  secure  the  same.  Also  have  taken 
S.  J.  Walker  for  further  security,  which  sale  and  contract  is  hereby  ratified  and 
confirmed  unanimously  by  this  Board,  and  that  the  mortgage  be  recorded. 

PARTIAL  SUSPENSION  OF  THE  COMPANY. — At  a  meeting  of 
the  Board,  November  12,  1857,  on  motion  of  Mr.  Oldham,  the 
following  resolution  was  unanimously  adopted : 

Resolved,  That  hereafter  this  company  cease  to  pay  the  interest  on  the  follow- 
ing bonds,  namely : 

Bonds  of  the  city  of  Cincinnati,     .  .    $100,000    6  per  cent,  $6,000 

Bonds  of  the  city  of  Covington,          .             200,000        "         "  12,000 

Bonds  of  the  county  of  Pendleton,  .         50,000        "        "  3,000 

Income  Bonds, 373,000  10  per  cent,  37,300 

Income  Bonds,       .        .        .        .  .       146,500    6  per  cent,  8,790 

Total,         .........    $67,090 

On  the.  14th  December,  1857,  a  committee  from  the  Pendle- 
ton County  Court,  called  upon  the  Board,  and  remonstrated 
against  the  suspension  on  their  bonds.  A  committee  of  the 
Board  was  appointed  thereon ;  and  the  committee  immediately 
reported,  that  it  would  be  the  duty  of  the  company  to  resume 
the  payment  of  interest  on  these  bonds  as  soon  as  practicable ; 
and  that  the  suspension  was  made  that  by  so  doing  the  com- 
pany would  "  ultimately  have  a  basis  for  the  security  and  pay- 
ment, not  only  of  interest,  but  of  bonds  and  stocks."  The 
resolution  was  adopted. 

ANNUAL  MEETING  OF  THE  STOCKHOLDERS,  1857. — This 
meeting  was  held  December  15th,  and  in  general  terms  indorsed 
the  action  of  the  Board  in  their  management  of  the  road,  and  sus- 
pension of  the  payment  of  interest  as  stated.  In  the  ANNUAL 
REPORT  full  explanations  were  given  ;  and  it  was  announced,  in 
connection  with  other  reduction  of  expenses,  as  a  temporary 
matter,  the  better  to  enable  the  company  to  "  resume  pay- 
ment of  suspended  claims  at  as  early  a  day  as  possible."  The 
earnings  of  the  road  were  reported  as  rapidly  increasing ;  and 
the  prospects  otherwise  very  promising.  The  leasing  of  the 
Maysville  road  from  Paris  to  Lexington  was  announced ;  as  also 


486  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

the  finishing  of  the  Danville  road  thence  to  Nicholasvifle,  thir- 
teen miles,  and  the  running  of  the  company's  cars  over  the  same. 

The  stockholders  then  proceeded  to  elect  directors  for  the  ensuing  year,  which 
resulted  in  the  election  of  the  following  gentlemen:  John  T.  Levis,  John  B.  Casey, 
B.  W.  Foley,  and  William  H.  Gedge,  of  Covington;  R.  B.  Bowler,  of  Cincinnati; 
Augustus  Robbins.  of  Pendleton  County ;  Lucius  Desha,  of  Harrison  County  ;  John 
Cunningham,  of  Bourbon  County;  and  Edward  Oldham,  of  Fayette  County. 

The  new  Board  met  for  organization  on  the  16th.  JOHN  T. 
LEVIS  was  elected  President,  with  a  salary  of  $2,000 ;  C.  A. 
WITHERS,  Superintendent,  with  a  like  salary  ;  and  Gr.  M.  CLARK, 
Secretary  and  Ticket  Agent,  with  a  salary  of  $1,500. 

The  President  was  made  temporary  Treasurer ;  and  B.  W. 
Foley,  R.  B.  Bowler,  and  J.  B.  Casey  appointed  a  committee  to 
devise  some  suitable  plan  for  the  management  of  the  finances  of 
the  company. 

On  motion  of  Mr.  Bowler,  a  committee  of  two  were  appointed 
to  confer  with  the  third  mortgage  bondholders  concerning  the 
interest  then  lying  over.  Messrs.  Bowler  and  Levis  were  ap- 
pointed the  committee. 

January  13,  1858. — It  was  resolved,  that  considering  the 
financial  condition  of  the  company,  and  the  need  for  depot  and 
other  improvements  necessary  to  carry  on  the  operations  of  the 
road,  "  Colonel  Bowler,  John  T.  Levis,  and  John  B.  Casey 
were  appointed  a  committee  to  endeavor  to  make  arrangements 
with  the  holders  of  first  and  second  mortgage  bonds,  whereby 
the  interest  would  be  postponed  one  year,  at  least." 

The  Executive  Committee,  "  in  consideration  that  R.  B. 
Bowler  shall  satisfy  and  assure  said  committee  that  whatever 
sum  or  sums  of  money  may  be  paid  him,  not  exceeding  $11,000, 
shall  be  refunded  by  him  on  the  1st  of  March,"  were  authorized 
to  advance  that  amount  to  him. 

A  committee  appointed  to  negotiate  a  loan  of  $30,000  from 
the  Northern  Bank,  reported,  on  the  llth  of  February,  that 
$20,300  could  be  obtained  at  ninety  and  one  hundred  and 
twenty  days,  on  the  names  of  J.  T.  Levis,  R.  B.  Bowler,  John 
B.  Casey,  A.  Robbins,  and  B.  W.  Foley,  which  was  agreed  to. 

February  11,  1858. — The  committee  on  the  management  of 
the  finances  reported,  and  thenceforward  a  treasurer  was  dis- 
pensed with.  All  sums  under  $100  were  paid  at  the  office  of 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  487 

the  company,  and  the  other  funds  deposited  in  the  individual 
name  of  the  President. 

G.  M.  Clark  was  employed  to  make  an  estimate  of.  the  em- 
bankment necessary  to  make  a  fill  at  Townsend,  and  also  of  the 
probable  cost  of  a  viaduct  across  the  valley. 

April  8,  1858. — A  communication  from  third  mortgage 
bondholders  was  received,  and  a  committee,  of  whom  none 
should  be  holders  of  said  bonds,  was  appointed  to  confer.  The 
President,  Mr.  Foley,  and  Mr.  Gredge,  were  appointed.  The 
Executive  Committee  (consisting  of  Messrs.  Levis,  Foley,  and 
Casey),  and  Mr.  Bowler,  u  were  appointed  a  committee  to  pre- 
pare statistics  of  the  resources  and  necessary  expenses  of  the 
company,  for  the  purpose  of  exhibiting  the  same  to  the  bond- 
holders." 

May  13,  1858. — Present,  the  President,  and  Messrs.  Cun- 
ningham, Foley,  W.  H.  Gedge,  Bowler,  Bobbins,  Desha,  and 
Oldham. 

The  committee  on  conference  with  third  mortgage  bondhold- 
ers reported,  that  they  had  had  a  conference  with  Messrs.  But- 
ler, Vallette,  and  other  holders  of  such  bonds,  and  recommended 
the  adoption  of  this  resolution,  as  "the  proper  disposition"  of 
the  subject : 

"Itesolved,  That  it  is  the  opinion  of  this  committee,  that  the  coupons  of  the 
third  mortgage  bonds,  due  on  the  1st  day  of  December,  1857,  be,  and  the  same 
are  hereby,  ordered  to  be  paid  out  of  any  funds  belonging  to  the  company,  on 
or  before  the  first  of  September  next. 

"  J.  T.  LEVIS,  B.  W.  FOLEY,  W.  H.  GEDGE,  Committee." 

On  motion,  the  report  was  recommitted  to  the  committee, 
with  instructions  to  inquire  into  the  financial  ability  of  the  com- 
pany to  carry  out  the  same,  and  report  at  the  next  meeting. 

A  depot  at  Paris  was  ordered  to  be  constructed  at  a  cost  of 
$5,000.  Also,  twenty  freight-cars  were  ordered  to  be  constructed 
or  purchased  in  time  for  the  Fall  trade. 

On  motion  of  R.  B.  Bowler,  a  committee  of  three  was  appointed'  to  see  if  a 
better  place  can  not  be  had  for  a  depot  at  Covington  than  the  present;  that  the 
committee  shall  have  full  power  to  contract  with  the  city  council  and  individ- 
uals as  to  right  of  way  and  use  of  streets  and  avenues,  if  found  necessary  ;  to 
report  the  cost  and  expense  of  removal,  and  the  ways  and  means  to  accomplish 
the  same.  Appointed  on  said  committee,  Messrs.  Bowler,  Casey,  and  Gedge. 

The    committee    instructed   to    bring   suit   against  the    late 


488  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

Treasurer,  S.  J.  Walker,  asked  that  the  time  be  extended  to  the 
next  meeting. 

June  10,  1858. — A  full  meeting  of  the  Board. 

On  motion  of  R.  B.  Bowler,  the  following  report  of  the  committee  on  confer- 
ence with  third  mortgage  bondholders  was  received  and  ordered  to  be  spread 
upon  the  Minutes : 

"  The  Committee  of  Conference,  to  whom  was  recommitted  the  report  and 
resolution  of  same  committee  of  May  meeting  of  the  Board,  touching  the  pay- 
ment of  December  interest  on  third  mortgage  bonds,  etc.,  under  instructions  to 
inquire  into  and  report  on  the  financial  ability  of  the  road  to  pay  the  same, 
would  report  that,  upon  a  thorough  and  careful  investigation  of  the  subject,  they 
deem  it  wholly  impracticable  for  the  road  to  pay  said  interest,  unless  the  indis- 
pensable repairs  and  improvements  thereof  should  be  totally  neglected,  and  leave 
it  with  rolling-stock  and  machinery  entirely  inadequate  for  the  carrying  of 
passengers  and  the  transportation  of  freight  over  said  road.  Your  committee 
would,  in  justification  of  the  above  opinion,  offer  in  connection  with  this  report 
an  abbreviated  estimate  of  the  necessary  outlay  and  expenditure  for  the  present 
fiscal  year,  ending  November  1,  1858,  to  wit:  t 

For  depot  purposes  in  Covington, $20,000 

For  depot  purposes  in  Paris, 5,000 

Payment  of  purchase  of  ground  for  engine  slide,     .        .        .  7,400 

Trestle-work,  Townsend  Valley, 15,000 

Water-stations  and  wood-sheds, 5,000 

Freight-cars, 18,888 

Depot  grounds  in  Covington, 2,000 

Wolf,  Scott,  and  Finch,  locomotives, 10,200 

Harkness,  Moore  &  Co.,          " 1,900 

Damage  for  right  of  way,      .         .        .        .        .        .        .  2,000 

Amount  unpaid  on  first  and  second  mortgages  of  March,  1850,  2,800    ' 

Loan  to  pay  interest  on  first  and  second  mortgage  bonds,    .  10,300 

Five  hundred  tons  railroad  iron,  at  60  dollars  per  ton,     .        .  80,000 

Two  hundred  and  fifty  rerolled,  at  27         "        ««  6,750 

Chairs,  spikes,  ties,  etc., 600 

Extras  above  ordinary  repairs, 4,000 

$145,600 

"To  this  may  properly  be  added  the  matured  interest  on  income  and  the  third 
mortgage  bonds,  as  well  as  guaranteed  interest  on  bonds  issued  to  Lexington 
and  Danville  Railroad  Company,  and  Pendleton  County  bonds,  which  matured 
before  suspension  in  1857 — all  of  which  is  about  $18,000.  In  view  of  these  facts, 
your  committee  have  thought  it  advisable  to  give  the  above  statement,  and  sub- 
mit the  same  for  such  action  as  the  Board  may  deem  right  and  proper. 

"Respectfully,      JOHN  T.  LEVIS,  B.  W.  FOLEY,  WM.  H.  GEDOE,  Committee" 
On  motion  of  E.  Oldham,  the  following  resolution  was  unanimously  adopted: 
"Resolved,  That  in  view  of  the  foregoing  report,  exhibiting  the  wants  of  the 
road,  in  the  way  of  repairs,  etc.,  and  in  view  of  the  financial  inability  to  make 
the  necessary  and  indispensable  repairs,  and  furnish  proper  supplies,  etc.,  as  ex- 
hibited by  the  above  report,  and  at  the  same  time  pay  the  interest  due  December, 
1867,  on  the  third  mortgage  bonds,  it  is  therefore  the  opinion  of  the  Board,  that 
the  company  can  not  pay  the  interest,  as  recommended  by  the  Committee  of  Con- 
ference, in  its  resolution  of  May  13,  1858." 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  489 

Messrs.  Levis,  Bobbins,  and  Foley  were  added  to  the  Com- 
mittee on  Depot  in  Covington,  with  instructions  to  make  some 
arrangements  for  loading  coal,  and  for  building  depots  in  Cov- 
ington  and  Lexington,  and  report  at  the  next  meeting. 

The  President,  and  Messrs.  Desha,  Robbins,  and  Cunning- 
ham were  appointed  a  committee  to  examine  Townsend-creek 
trestle-work,  to  test  its  condition,  and  report. 

A  communication  from  James  Winslow,  trustee,  was  referred 
to  Foley,  Bowler,  and  Levis,  to  consult  counsel. 

Further  time  was  given  the  Walker  suejng  committee. 

June  19,  1858. — Upon  a  call  of  the  President,  the  Board  met  at  10i  o'clock 
A.  M.  Present:  John  T.  Levis,  John  B.  Casey,  W.  H.  Gedge,  B.  W.  Foley,  R.  B. 
Bowler,  and  Augustus  Robbins. 

The  President  stated  that  the  Board  was  called  together  to  receive  the  report 
of  the  special  committee  appointed  to  report  a  plan  of  operations  to  the  bondhold- 
ers ;  whereupon  the  following  report  was  read,  and  ordered  to  be  printed,  and 
otherwise  advertised  in  such  manner  as  the  committee  think  advisable: 

PROPOSITION  TO  BONDHOLDERS. 
To  the  Mortgage  Bondholders  of  the   Covington  and  Lexington  Railroad: 

The  present  Board  of  Directors  brought  up  the  books  during  the  past  year, 
and  obtained  a  correct  balance-sheet.  In  November  last  their  labors  were  com- 
pleted. Their  report,  read  at  the  meeting  of  the  stockholders,  on  the  15th  of 
December  following  (and  since  published),  shows  that : 

The  company  owed  to  its  officers,  laborers,  and  bills  payable  given 

for  supplies, $100,063  51 

All  the  reliable  resources  they  had  to  meet  this  demand  with,  were,          8,104  48 


Showing  a  deficiency  of  $91,959  03 

In  less  than  thirty  days  they  had  interest  maturing  amounting  to  31,000  00 


$122,959  03 
To  meet  this,  nothing  was  available  but  the  November  earnings  of 

the  road, 20,685  00 

Leaving  an  active  debt  (had  the  interest  been  paid),  Dec.  1,  1857,  of  $102,274  03 

Under  these  circumstances,  they  had  no  alternative  but  to  pass  the  Decem- 
ber interest  on  the  third  mortgages  and  incomes,  amounting  to  $31,000,  and  to 
commence  a  rigid  economy  in  the  administration  of  the  road.  By  borrowing 
$20,000  on  the  individual  credit  of  the  directors,  they  were  enabled  to  meet  the 
interest,  due  March  1st,  on  the  first  and  second  mortgage  bonds.  This  interest 
ought  also  to  have  been  passed,  and  would  have  been,  had  there  been  time  to  get 
the  facts  before  the  holders. 

One  of  the  first  acts  of  the  new  Board  was  to  appoint  a  committee  to  present 
to  the  bondholders  a  report  of  the  necessities  of  the  road,  and  to  ask  their  for- 
bearance for  a  short  period,  to  enable  them  to  repair  it,  and  also  to  finish  it, 
WHICH  HAD  NEVER  BEEN  DONE.  By  the  estimates  which  have  been  carefully  made 
by  this  committee,  there  is  required  near  $800,000  to  put  it  in  complete  condition, 


490  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

and  make  it,  as  it  deserves  to  be,  a  first-class  road.  The  iron  that  was  put  on 
it  has  proved  to  be  of  a  very  inferior  quality,  and  requires  to  be  all  re-rolled; 
moreover,  a  considerable  quantity  of  new  iron  must  be  added. 

There  is  scarcely  a  structure  on  it  that  can  be  called  a  depot-house ;  at  Cov- 
ington,  its  great  terminating  point,  an  old  horse-stable  is  used  for  that  purpose. 
The  estimated  loss  and  damage  in  five  years,  from  the  want  of  these  conven- 
iences, would  pay  for  their  erection.  The  bridges  are  decaying,  and  require 
prompt  attention  to  save  them  from  ruin ;  there  are  no  wood-sheds ;  additional 
water-stations  are  absolutely  required;  its  floating  debt  harasses  and  embar- 
rasses it;  it  is  imperfectly  stocked;  and  to  enable  it  to  do  its  business,  it  requires 
additional  passenger-cars,  a  large  number  of  freight-cars,  and  four  more  loco- 
motive engines. 

Now,  how  are  the  means  to  accomplish  all  this  to  be  obtained?  The  road 
can  not  borrow  the  money,  it  has  no  securities  to  give.  The  directors,  in  the 
aggregate,  with  no  large  pecuniary  interest  in  it,  but  feeling  its  great  value  and 
importance  to  the  country,  have  so  liberally  advanced  their  individual  means  and 
credit,  they  can  not  be  expected  to  go  any  further. 

There  is  nothing  now  left  but  to  appeal  to  you ;  and  in  doing  so,  the  Board 
propose  to  put  you  to  LITTLE  OR  NO  INCONVENIENCE,  for  all  that  is  asked  is  to 
loan  a  few  coupons  to  be  funded.  The  net  earning  of  the  road  will  not  only  pay 
you  the  semi-annual  interest,  put  it  in  the  finest  condition,  stock  it  well  as  it 
should  be,  but  will  also  provide  a  sinking  fund  sufficient  to  liquidate  the  funded 
coupons  at  maturity. 

This  is  demonstrable  as  follows : 

$260,000  first  mortgage  bonds  mature  March  1st,  1862.     There  are  but 

eight  coupons  left,  amounting  to $72,800 

100,000  firsts,  due  March  1,  1867,  1  ™  OOQ  nAA 
1,000!000  seconds,  due     «     «  1883!  } From  these  cut  ten  couPonS>             398'000 
498,000  thirds,  due  June  1,  1885.     This  issue  calls  for  $600,000,  but 
$100,000  may  be  considered  to  be  under  the  control  of  the  Com- 
pany.    From  these  cut  eleven  coupons, 191,700 

$(562,530 
Less  interest,  averaged  to  September  1st,  1858,        ....  111,380 

1551,150 

This  amount  to  be  funded  in  the  bonds  of  the  company,  payable  as  follows: 
First  mortgage  in  four  years,  second  mortgage  in  five  years,  and  third  in  five  and 
a  half  years,  to  bear  interest  at  seven  per  cent  per  annum;  and  as  the  coupons 
cut  off  are  secured  by  a  mortgage  on  the  road,  they  can  either  be  attached  and  go 
with  the  bond,  or  be  put  into  the  hands  of  the  trustees,  as  the  holders  may  prefer. 
The  first  semi-annual  interest  on  these  deferred  bonds  will  be  due  March  1st, 
1859,  amounting  to  $19,200.25,  and  for  the  year, '$38,580.50. 

Which  for  five  years  would  be $192,900 

The  estimated  outlay  to  complete  the  road,  is          ....  800.000 

$992,900 
Say  that  the  road  nets  $250,000  per  year,  which  is  a  low  estimate; 

this  will  give  for  the  five  years .     1,250,000 

And  leave  for  the  Sinking  Fund,      .......  $257,100 

Which,  if  judiciously  managed,  with  the  increased  earnings  over  and  above 
the  estimates,  will  absorb  the  funded  coupon  debt. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  491 

After  the  1st  of  March,  1864,  the  annual  interest  on  the  entire  mort- 
gage debt,  will  be $132,660 

Say  at  that  time  the  road  will  be  earning 300,000 


There  will  be  left  per  year,  toward  canceling  debts  not  secured,  and 

dividends  on  the  stock, $167,340 

Believing  that  it  is  to  the  interest  of  the  bondholders  to  carry  out  the  sug- 
gestions of  this  report,  and  that  the  repair  and  equipment  of  the  road  should  im- 
mediately be  commenced,  the  Board  will  proceed  to  do  so,  presuming  that  you  will 
ratify  this  report.  J.  T.  LEVIS,  President. 

[The  following  P.  S.  is  not  in  the  book  of  minutes,  but  is  referred  to  in  Mr. 
Levis's  deposition,  and  explains  itself.] 

P.  S. — Since  the  above  report  was  placed  before  the  public  through  the  press, 
the  only  objection  we  have  heard  made  to  it  is,  that  the  third  mortgage  bonds  do 
not  bear  their  proportion — that  is,  the  difference  in  the  scale  of  coupons  cut  off 
is  too  small. 

It  was  not  contemplated  to  make  any  scale,  and  as  all  received  their  interest 
on  the  deferred,  all  should  share  alike.  The  difference  made  in  the  quantity  of 
each  security  was  unavoidable,  owing  to  the  fact  of  the  first  mortgages  having 
but  eight  coupons  on  them,  and  the  third  having  one  coupon  lying  over.  The 
Board  endeavored  to  do  justice  to  all,  and  show  partiality  to  none;  but  if  any 
are  dissatisfied,  and  it  is  possible  to  get  the  bondholders  together,  and  they  can 
arrange  it  better,  we  shall  be  pleased.  In  the  mean  time  the  Board  feel  it  to 
be  their  duty  to  put  the  road  in  order  as  fast  as  their  receipts  will  admit — and 
they  are  using  their  means  for  this  purpose,  thereby  making  your  security  the 
more  solid. 

Whereas,  this  Board  has,  by  the  adoption  of  the  foregoing  report,  manifested 
its  determination  to  use  the  proceeds  or  earnings  of  the  road  for  the  indispensa- 
ble repairs  and  equipments  thereof,  and  that  for  some  time  the  regular  interest 
of  the  mortgage  bonds  will  have  to  be  funded,  it  is  therefore  the  opinion  of  this 
Board  that  upon  strict  principles  of  justice  and  equity  the  interest  falling  due 
on  the  third  mortgage  bonds  in  December,  1857,  ought  and  should 'be  paid  before 
the  carrying'  out  of  the  above  object.  Whereupon,  on  motion  of  Mr.  Gedge,  the 
following  resolutions  were  adopted: 

Resolved,  That  so  much  of  the  resolution  passed  at  the  regular  meeting  of  this 
Board  in  the  present  month,  as  declares  the  company  unable  to  pay  the  December 
interest  on  third  mortgage  bonds,  be  and  the  same  is  hereby  rescinded. 

Resolved,  further,  That  the  interest  on  the  third  mortage  bonds  falling  due 
December  1,  1857,  and  previous  thereto,  be  paid  out  of  any  money  belonging  to 
the  company  on  or  before  the  1st  of  September  next. 

July  8,  1858. — All  directors  present,  except  Messrs.  Cun- 
ningham and  Robbins. 

The  Committee  on  Townsend  Trestle  reported  that  they  had 
visited  the  trestle  with  "Mr.  Clarke,  bridge-master : 

"One  of  the  committee,  in  company  with  Mr.  C.,  walked  over  the  bridge  and 
trestle,  and  examined  closely  the  track,  timbers,  and  cross-beams,  which  they 
found  in  very  good  condition,  except  some  few  timbers,  which  seems  to  have  had 
some  sap-wood  left,  which  was  decayed,  but  not  so  as  to  weaken  the  structure. 
.  .  .  The  timbers  generally  were  found  in  good  condition.  Some  of  the  tim- 


492  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

x 

bers  have  been  strained  by  not  being  kept  properly  adjusted.  Extra  supports 
have  been  placed  between  each  post  of  the  trestle,  to  strengthen  the  bearing 
beams.  The  bridge  portion  of  the  structure  appears  to  be  in  very  good  condition. 
Two  freighUtrains  passed  over  the  work  whilst  a  part  of  your  committee  were 
under  the  same,  and  no  sway  or  tremor  could  be  observed.  Your  committee  be- 
lieve that  the  structure  is  entirely  safe,  and  can  be  kept  so  for  some  time  to  come, 
but  would  recommend  that  as  it  will  take  a  long  time  to  rebuild  or  remodel  the 
trestle,  that  some  immediate  action  be  taken  thereon,  and  such  steps  taken  as  will 
insure  a  safe  and  permanent  bridge  across  the  valley. 

"JOHN  T.  LEVIS,  Chairman  Committee." 

It  was  ordered  that  advertisement  for  proposals  for  the  erec- 
tion of  stone  piers  across  the  valley,  should  be  made. 

The  committee  to  whom  was  referred  the  communication  of 
James  Winslow,  reported  that  they  had  consulted  counsel,  and 
were  advised  "that  as  the  notice  was  from  three  bondholders, 
as  for  a  special  purpose,  and  that  purpose  having  been  arranged, 
and  no  suit  brought  by  them,  the  notice  is  not  «f  a  binding 
character." 

Longer  time  was  asked  for  and  granted  to  the  Walker  suit 
committee. 

August  12,  1858.— The  Townsend  Trestle  and  the  Walker 
suit  were  again  before  the  Board,  but  no  final  action  was  had. 

The  President,  and  Messrs.  Casey,  Foley,  Gedge,  and 
Bowler  were  appointed  a  committee  to  confer  with  the  bond- 
holders of  the  road,  "and  to  adopt  such  measures,  and  close 
such  negotiations  touching  the  same,  as  in  their  judgment  may 
redound  to  the  future  advantage  and  success  of  the  road." 

September  9,  1858. — The  Walker  suit  and  the  Townsend 
Trestle  were  again  under  consideration,  and  postponed. 

The  President  and  Mr.  Bowler  were  appointed  a  committee 
"fully  authorized  to  employ  a  competent  engineer,  and  place 
him  immediately  on  the  road  for  the  purpose  of  ascertaining  and 
defining  the  cost  of  such  necessary  repairs  and  improvements  as 
may  be  adequate  to  the  wants  of  the  Covington  and  Lexington 
Railroad,  and  for  the  purpose  of  giving  satisfactory  information 
to  all  parties  interested." 

[NOTE. — See  Report  and  Estimate  of  WILLIAM  H.  CLEMENT,  attached  to  his 
deposition  hereinafter.] 

Mr.  Foley  moved  that  the  coupons  on  the  Covington  guaran- 
teed bonds  be  paid.  On  motion  of  Mr.  Bowler,  the  motion  was 
laid  on  the  table. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  493 

October  15,  1858. — On  motion  of  Mr.  Desha,  the  interest  on 
the  first  mortgage  bonds,  falling  due  September  1,  1858,  were 
ordered  to  be  paid. 

[INTEREST  ON  SECOND  MORTGAGE  BONDS.— On  the  1st  of  November,  1858,  the 
second  mortgage  bondholders  held  a  meeting  at  the  Burnet  House,  in  Cincinnati, 
and  sent  the  following  proposition  to  the  Board.  It  is  inserted  here,  from  an  Ex- 
hibit to  the  deposition  of  Henry  Hanna,  to  make  more  intelligible  the  action  of 
the  directors  in  reply  thereto :] 

At  a  meeting  of  the  committee  of  the  second  mortgage  bond-owners  of  the 
Covington  and  Lexington  Railroad,  held  on  Monday,  November  1,  1858,  the  fol- 
lowing proposition  was  submitted  and  unanimously  adopted: 

"  The  Cincinnati  Committee  appointed  by  holders  of  second  mortgage  bonds 
of  the  Covington  and  Lexington  Railroad  Company,  have  fully  discussed  and 
considered  the  whole  subject  committed  to  them ;  and  having  had  before  them 
exhibits  of  the  business  and  liabilities  of  the  company,  and  also  a  proposition 
from  them,  for  an  arrangement  of  time  upon  a  portion  of  the  second  mortgage 
coupons,  have  come  to  the  following  conclusions: 

"1.  That  the  receipts  from  the  earnings  of  the  road  are  sufficient  to  enable  the 
Board  of  Directors  to  pay,  promptly  and  continuously,  the  interest  upon  the  first 
and  second  mortgage  bonds,  and  make  such  repairs  upon  the  road  and  increase 
of  rolling  stock  as  the  business  of  the  road  may  demand;  and  that  the  committee, 
therefore,  feel  themselves  compelled  to  decline  the  proposition  of  the  railroad 
company. 

"2.  That  inasmuch  as  the  sixty  days  allowed  by  law  to  the  company,  in 
which  to  provide  for  the  interest  upon  the  second  mortgage  bonds,  have  expired 
without  any  provision  having  been  made  for  the  psfyment  of  said  interest  (owing 
probably  to  the  fact  that  negotiations  were  pending  between  the  railroad  com- 
pany and  the  committee),  lhat  no  advantage  will  be  taken  of  the  delay,  provided 
the  interest  due  the  1st  of  September  last,  shall  be  provided  for  by  the  railroad 
company,  by  the  1st  of  January  next,  with  the  interest  thereon. 

"  3.  That  the  railroad  company  shall  notify  the  committee  of  their  acceptance 
or  rejection  of  this  arrangement  within  fifteen  days  from  this  date." 

REPLY  OF  THE  DIRECTORS. — November  11,  1858. — A  full 
meeting  of  the  Board.  The  President  presented  the  action  of 
the  second  mortgage  bondholders,  accompanied  with  a  request 
that  the  Board  would  take  some  action  thereon.  A  preamble 
and  resolutions  were  adopted.  The  substance  of  the  preamble 
is  embraced  in  the  resolutions,  which  are  as  follows: 

"  Resolved,  1.  That  the  statements  contained  in  the  first  conclusion  of  said 
meeting,  touching  our  ability  to  pay  promptly  the  interest  on  the  first  and  second 
mortgage  bonds,  and  make  such  repairs,  and  furnish  rolling  stock,  etc.,  from  the 
earnings  of  the  road,  at  this  time  are  not  true. 

"  Resolved,  2.  That  the  directors  have  been  somewhat  disappointed  in  the  ac- 
tion of  said  committee;  and  find  that  they,  perchance,  like  those  they  represent, 
have  not  been  actuated  with  that  spirit  of  liberality  which  would  cause  them,  for 
a  short  time,  to  lose  sight  of  the  stringent  enforcement  of  their  dues. 


494  COV.  &  LEX.  R.  R.  CO.  *.  BOWLER,  ET  ALS., 

"  Resolved,  3.  That  the  President  of  this  Board  be,  and  he  is  hereby,  author- 
ized and  directed  to  inform  the  committee  of  second  mortgage  bondholders  of 
the  Covington  and  Lexington  Railroad,  that  this  company  can  not  comply  with 
the  requirements  contained  in  their  proceedings  of  November  1,  1858,  in  conse- 
quence of  the  absolute  want  of  funds  to  do  so;  but  at  the  same  time,  to  give 
assurances  that  we  have  every  encouragement  to  believe  that,  during  the  year 
1859,  the  company  will  be  enabled  to  pay  fully  the  coupons  on  the  first  and  second 
mortgage  bonds,  matured  and  maturing,  up  to  that  time,  and  regularly  to  continue 
to  do  the  same  at  all  times  thereafter. 

"Resolved,  4.  That  whatever  amount  of  funds  this  company  may  have  on 
hand  the  1st  of  January,  1859,  after  paying  the  current  expenses,  shall  be 
promptly  applied  to  the  payment  of  coupons  past  due  on  the  second  mortgage 
bonds;  and  that  the  company  will  continue  to  apply  the  earnings  of  the  road,  as 
fast  as  the  same  can  be  made  available,  until  the  entire  interest  on  said  bonds 
shall  have  been  paid." 

At  the  following  meeting  of  the  Board,  December  9,  1858, 
Mr.  Bowler  being  present,  it  was  "  ordered  that  the  report  of 
the  committee  of  bondholders,  and  the  reply  thereto  by  this 
company,  be  published  in  pamphlet  form  for  distribution;"  and 
he  was  added  to  the  Executive  Committee,  "for  the  purpose  of 
publishing  the  above  report  and  reply."  At  an  adjourned  meet- 
ing, on  the  14th  of  December,  the  committee  reported  that  the 
proposition  and  reply  could  not  be  printed  in  time  for  the  stock- 
holders' meeting ;  and  thereupon  the  printing  was  dispensed  with 
at  that  time. 

On  the  llth  of  November,  at  the  meeting  of  the  Board,  the 
President,  and  Messrs.  Gedge,  Bowler,  and  Bobbins  were  ap- 
pointed a  committee  "to  settle  the  matter  of  monthly  balances 
to  be  allowed  S.  J.  Walker,  while  Treasurer  of  the  company,  for 
which  no  interest  is  to  be  charged  him.''  At  the  meeting  on 
the  14th  of  December  this  was  reported  as  having  been  done. 

ANNUAL  MEETING  OF  THE  STOCKHOLDERS,  1858. — December 
loth. — The  President  and  other  officers  presented  their  annual 
reports,  which  "were  adopted  and  ordered  to  be  printed." 

On  motion  of  Mr.  BENTON,  a  committee,  consisting  of  him- 
self, Judge  Kinkead,  Judge  Carr,  Caleb  Walton,  and  Judge 
Samuels,  were  appointed  "  to  inquire  into  and  report  (after  con- 
ference with  the  creditors)  the  best  course,  in  their  opinion,  for 
this  company  to  pursue  in  reference  to  its  affairs."  And  the 
holders  of  the  several  classes  of  bonds  were  requested  to  appoint 
committees  to  confer  with  this  committee  of  the  stockholders. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  495 

Counsel  differing  as  to  the  terms  of  the  President's  Annual 
Report,  and,  indeed,  its  meaning  having  been  attempted  to  be 
sworn  to  by  one  witness,  it  is  given  in  full.  It  will  be  seen  that 
no  reference  is  made  to  the  foreclosure  suit  in  behalf  of  the  sec- 
ond mortgage  bondholders,  in  which  service  was  made  on  the 
President  on  the  1st  of  December  preceding : 

PRESIDENT'S  REPORT. 

OFFICE  OF  COVINGTON  AND  LEXINGTON  R.  R.,  COVINGTOX,  Nov.  1,  1858. 
To  the  Stockholders  of  the  First  Division  of  the  Kentucky  Central  Railroad: 

GENTLEMEN, — la  comformity  with  the  charter  of  your  company,  it  becomes 
my  duty  to  lay  before  you  a  history  of  the  actions  of  your  directors,  and  an  ex- 
hibit of  the  condition  and  operations  of  the  road  for  the  fiscal  year  just  closed. 

As  reported  to  you  by  supplementary  statement,  at  your  last  annual  meeting, 
some  radical  change  of  policy  was  found  to  be  imperative;  and,  for  the  causes 
then  given,  your  managers  stopped  payment  of  interest  on  certain  classes  of 
claims  from  and  after  November  12,  1857,  paying  on  said  claims  only  the  interest 
due  prior  to  that  date,  so  as  to  make  no  distinction  between  parties  holding  the 
same  class  of  obligations. 

There  has  been  no  interest  or  coupons  paid  on  any  of  the  claims  so  sus- 
pended, which  became  due  after  the  date  of  the  order  above  mentioned,  and  no 
definite  plan  has  been  adopted  for  adjusting  said  indebtedness,  from  the  fact  that 
it  was  deemed  advisable  to  first  make  some  amicable  arrangement  with  the  holders 
of  the  mortgage  bonds,  negotiations  for  which  purpose  have  been  pending  for 
some  time — so  far  without  success. 

To  enable  your  directors  to  secure  the  property  of  the  road,  a"nd  put  it  in 
a  condition  that  it  can  be  more  profitably  and  safely  worked,  it  was  absolutely 
necessary,  and  deemed  advisable,  to  at  once  expend  a  considerable  portion  of  the 
earnings  in  building  cars,  extending  side-tracks,  ballasting,  and  removing  de- 
fective cross-ties  and  rails  from  the  main  track,  thereby  making  it  more  perma- 
nent, and  preventing  rapid  decay. 

The  depot  at  Paris  was  built  to  keep  from  transacting  the  heavy  business 
of  that  station  out  of  doors.  The  amount  due  officers  and  laborers,  which  has 
been  held  back  to  enable  the  company  to  pay  the  coupons  that  were  paid,  was  to 
be  provided  for,  and  has  been  partially  paid. 

And  there  were  other  claims  against  the  property  of  the  company,  which,  if 
not  paid,  would  have  subjected  the  company  to  serious  loss  and  inconvenience; 
which  claims  have  been  partly  paid  and  arranged. 

In  making  these  expenditures,  and  others  of  a  similar  nature,  in  addition  to 
the  regular  operating  expenses,  your  directors  were  left  without  the  means  to  pay 
the  interest  on  the  third  mortgage  bonds,  falling  due  on  the  1st  of  June  last,  and 
that  on  the  second  mortgage,  due  the  1st  of  September  last;  also,  coupons  due  at 
the  same  time  on  the  bonds  of  the  company,  guaranteed  by  the  city  of  Covington. 

They  therefore  stopped  payment  of  all  coupons  on  said  bonds  except  those 
due  previous  to  the  above  dates,  hoping  to  arrange  with  the  holders  for  a  further 
expenditure  in  building  depots,  permanent  bridges,  etc.,  improvements  absolutely 
essential,  and  which  would  add  great.ly  to  the  value  of  all  the  securities  of  the 
company,  as  well  as  increase  the  net  earnings  of  the  road. 


496  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

Your  managers  deplore  the  necessity  of  asking  creditors  for  assistance,  but 
they  feel  conscious  of  the  rectitude  of  their  policy,  and  that  they  ask  nothing  that 
will  not  be  beneficial  to  all  the  interests  involved. 

The  business  over  your  road  for  the  past  twelve  months  has  been  more 
equally  distributed  through  the  entire  year,  having  had  no  excessively  large  re- 
ceipts, or  very  small  ones,  in  any  one  month,  enabling  the  traffic  to  be  conducted 
with  more  safety  and  satisfaction  with  the  inadequate  accommodations  possessed. 

The  earnings  have  been  somewhat  less  than  anticipated,  owing  to  the  falling 
off  in  passenger-travel,  which,  no  doubt,  may  be  attributed,  in  part,  to  the  finan- 
cial panic  of  last  Fall,  from  which  the  public  have  not  yet  entirely  recovered. 
Nearly  all  of  the  roads  in  this  country,  and  especially  those  in  the  West,  show 
conclusively,  by  their  receipts  in  this  department,  that  there  has  been  some  gen- 
eral cause  to  keep  the  people  from  traveling. 

Notwithstanding  the  decrease  in  this  particular,  the  gross  earnings  exhibit 
a  gradual  increase,  although  the  work  has  been  done  with  a  short  supply  of  roll- 
ing stock,  and  without,  comparatively,  any  depot  accommodations,  proving  satis- 
factorily the  growing  importance  of  your  work  to  the  country  through  which  it 
passes,  and  that  the  local  business,  being  steadily  built  up,  will,  in  a  few  years, 
be  sufficient  to  sustain  your  company,  if  it  can  be  relieved  of.  its  present  em- 
barrassments, which  have,  from  its  commencement,  hung  over  its  management 
like  an  incubus. 

It  requires  no  elaborate  theorizing  to  demonstrate  the  first  and  continued 
cause  of  all  the  financial  difficulties  of  this  company,  as  it  is  well  known  that 
the  rond  was  commenced  and  prosecuted  to  its  present  condition  during  a  period 
of  time  when  there  was  one  of  the  greatest  financial  panics  with  which  the 
country  was  ever  visited. 

It  was  want,  of  capital  at  the  beginning  of  the  enterprise,  and  this  has  con- 
tinued to  the  present  time.  To  relieve  your  road"  of  its  present  difficulties  is  no 
small  undertaking;  but  your  directors  used,  and  have  continued  to  use,  their 
most  urgent  and  honest  efforts  to  attain  that  end,  hoping,  if  met  with  a  spirit  of 
liberality  by  all  parties  concerned,  to  eventually  succeed. 

Your  track  (excepting  bridges)  is  now  in  a  better  condition  than  it  ever  has 
been,  and,  with  the  addition  of  sufficient  rolling  stock,  good  depot  accommoda- 
tions, water-stations,  and  permanent  bridges,  would  be  a  first-class  road,  as  from 
its  central  location  and  importance  it  should  be. 

For  a  detailed  statement  of  the  operations  of  the  road,  I  refer  you  to  the 
Superintendent's  report,  and  for  financial  condition  thereof  to  the  tabular  exhibits 
accompanying  the  Secretary's  communication;  all  of  which  I  respectfully  submit 
for  your  consideration.  JOHN  T.  LEVIS,  President. 

The  earnings  were  $458,820.99 ;  the  current  expenses, 
$239,262.22;  and  the  net  earnings,  $198,316.80.  The  Super- 
intendent, in  his  report,  says  that  among  the  expenditures  were 
large  amounts  on  improving  the  track,  "  two  trains  having  been 
employed,  during  the  Summer  and  Fall,  in  clearing  out  the 
ditches,  hauling  stone  for  ballast,  and  improving  the  road-bed 
generally."  He  stated  the  road  was  then  in  better  condition 
than  it  ever  had  been. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  497 

On  proceeding  to  the  election  of  directors,  it  was  found  that 
John  T.  Levis  had  received  5,203  votes;  John  B.  Casey,  4,496 ; 
B.  W.  Foley,  4,221 ;  W.  H.  Gedge,  4,731 ;  R.  B.  Bowler,  3,339; 
A.  Robbins,  4,175;  Lucius  Desha,  4,175;  John  Cunningham, 
5,213;  and  Edward  Oldham,  4,284;  and  they  were  declared 
elected  directors. 

The  same  officers,  with  the  same  salaries,  were  re-elected. 

The  committee  on  settlement  with  S.  J.  Walker  was  contin- 
ued ;  and  on  the  1 7th  of  December  they  reported  a  settlement, 
and  the  same  was  adopted.  Two  thousand  dollars  was  ordered 
to  be  paid  him,  in  full  of  his  salary  as  Treasurer  for  the  year 
1857. 

December  27,  1858. — A  communication  was  received  from 
the  committee  of  stockholders  appointed  under  Mr.  Benton's 
resolution,  in  regard  to  the  affairs  of  the  company,  and  asking 
the  concurrence  of  the  Board  in  their  proposed  action.  This 
was  promised,  and  the  following  resolution  (embracing  the  sub- 
stance of  the  action  of  the  Board)  adopted : 

"Resolved,  That  we  will,  as  directors,  cheerfully  conform  to  any  act  of  the 
committte  appointed  by  the  stockholders,  at  their  recent  annual  meeting,  so  soon 
as  their  action  shall  be  reported  to  and  approved  by  the  said  stockholders, 
conditioned  that  all  shall  be  done  in  compliance  with  the  charter,  and  on  such 
arrangements  as  can  be  accomplished  and  carried  out  by  the  Board." 

February  10,  1859. — The  Board  having  been  asked  to  pay  a 
judgment  for  $15,000  recovered  by  the  Lexington  and  Danville 
Railroad  Company,  it  was  answered  that  the  payment  "  would 
be  inviting  suits,  and  giving  precedence  to  claims  of  a  minor 
and  more  inferior  character  over  those  that  have  already  prece- 
dence by  superior  and  prior  lien ;"  and  payment  was  therefore, 
at  that  time,  declined. 

March  10,  1859. — "Messrs.  Gedge,  Bowler,  and  Foley  were 
appointed  a  committee  to  investigate  the  subject  of  damages 
between  this  company  and  the  original  Western  Baptist  Insti- 
tute ;  and  also  to  ascertain  on  what  terms  an  additional  amount 
of  ground  can  be  purchased  from  said  Institute,  for  additional 
room." 

March  11,  1859. — At  a  called  meeting  of  the  Board,  a  prop- 
osition from  H.  VALLETTE,  Esq.,  to  lease  the  road  for  a  term  of 
years,  was  presented  and  discussed.  The  same  was  declined  on 

32 


498  COV.  &  LEX.  R.  R.  CO.  *.  BOWLER,  ET  ALS., 

the  ground  that  the  Board  had  no  power  to  part  with  the  pos- 
session or  control  of  the  road. 

April  14,  1859. — The  resignation  of  Lucius  Desha,  dated 
March  18th,  as  a  director  of  the  company,  was  received  and 
spread  on  the  minutes. 

The  committee  on  purchasing  land  from  Walker  reported 
progress ;  and  another  committee;  consisting  of  Messrs.  Levis, 
Bowler,  Foley,  Bobbins,  Gedge,  and  Casey,  were  appointed  on 
the  Townsend  Valley  improvement. 

April  28,  1859. — A  called  meeting  was  held  to  hear  the 
report  of  the  committee  on  purchasing  land  from  Walker,  which 
was  in  favor  thereof,  and  the  same  ordered  to  be  done  for  the 
sum  of  $27,000  cash. 

On  motion  of  Mr.  Bowler,  it  was  recited  that  S.  J.  Walker 
had  settled  his  account  as  Treasurer ;  and  thereupon  his  securities 
were  released,  the  settlement  confirmed,  and  the  Secretary  di- 
rected to  close  his  account  on  the  books  of  the  company. 

June  9,  1859. — Committee  on  Townsend  Valley  improve- 
ment reported  that  they  were  negotiating  a  purchase  of  land  as 
a  u  burrowing  pit ;"  and  a  committee  was  appointed  to  consider 
the  subject  of  building  a  protection-wall  for  Mr.  Carneal. 

July  14,  1859. — The  committee  appointed  to  settle  with  S. 
J.  Walker,  was  given  full  power  to  settle  his  "  bond  account," 
with  power  to  "  pay  off  and  satisfy  whatever  amount  may  be  clue 
said  Walker." 

PAYING  THE  DIRECTORS'  DEBT. — August  9,  1859. — At  a  called  meeting,  held 
this  day,  there  was  present.  John  T.  Levis,  B.  W.  Foley,  W.  H.  Gedge,  R.  B. 
Bowler,  and  A.  Robbins.  Whereupon  the  following  resolution  was  unanimously 
passed : 

"  Whereas,  some  of  the  former,  and  a  portion  of  the  present  directors  of  the 
Covington  and  Lexington  Railroad  Company,  became  largely  bound  and  liable 
for  the  benefit  of  said  road,  by  certain  notes,  bills,  bonds,  and  other  obligations 
in  writing,  which  said  liabilities,  or  a  portion  thereof,  are  still  existing,  and  are 
at  this  time  urgently  pressing  upon  said  parties  for  payment — said  parties  being 
M.  M.  Benton,  John  B.  Casey,  John  T.  Levis,  Augustus  Robbins,  C.  A.  Withers, 
and  S.  J.  Walker;  and  whereas,  we  deem  it  our  duty  while  we  have  it  in  our 
power  as  directors,  to  remove,  as  fur  as  practicable,  said  liabilities ;  therefore, 

"Eetolved,  That  the  President  be,  and  he  is  hereby,  authorized  and  directed  to 
apply  such  funds  of  the  company  as  may  now  be  under  the  control  of  this  Board, 
and  such  as  may  hereafter  be  derived  from  United  States  mail  service,  also  the 
claim  of  Rogers  &  Sherlock,  and  apply  the  same  to  the  payment  of  said  liabilities, 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  499 

so  far  as  said  funds  may  go  toward  the  payment  of  said  obligations,  in  such  man- 
ner as  in  the  judgment  of  said  President  may  best  redound  to  the  interest  of  said 
road,  as  well  as  the  full  settlement  of  the  aforesaid  claims." 

As  connected  with  this  subject,  and  for  the  better  understand- 
ing of  the  matter,  it  is  here  stated  that  at  the  following  meeting 
of  the  Board,  September  8th,  the  committee  appointed  to  settle 
Walker's  "bond  account,"  Messrs.  Levis,  Bowler,  and  Gedge 
reported  that  they  had  allowed  the  said  Samuel  J.  Walker 
various  sums  of  money  as  charges  against  the  company,  in  all 
amounting  to  $26,556.03,  and  which  "was  fully  agreed  to  by 
the  Board." 

As  also  connected  therewith,  this  account,  as  copied  from  the 
books  of  the  company  by  E.  B.  CLARK,  and  appended  to  his 
deposition,  is  here  given : 

LEVIS,  BENTON,  AND  CASEY,  TRUSTEES,  Dr. 

1859.     June  16— J.  W.  Walker,         ......     $3,399  92 

30— R.  A.  Jones,  P.  M., 7,500  00 

5,970  00 
9,950  00 

4.965  00 

5.966  00 


"     30— 

July  31— 

"     31— 

"     31— 

Aug.  13- 


24,286  97 


31— U.  S.  Mail, 4,317  85 

Sept.  30— R.  A.  Jones,  P.  M., 6,70062 

$73,056  36 

CONTRA,  Or. 

1859.     Order  of  8.  J.  Walker,  for  Levis,  Benton,  and  Casey, 
Trustees,  to  pay  amount  allowed  by  committee  to  settle 
said  Walker's  bonded  account,         ....       $26,556  03 
Profit  and  Loss, 46,500  33 


$73,056  36 

It  was  shown  that  at  the  times  named,  R.  A.  Jones  was  the 
paymaster  of  the  company. 

July  28,  1859. — Board  organized  as  a  called  meeting.  Present:  John  T.  Levis, 
John  B.  Casey,  B.  W.  Foley,  Wm.  H.  Gedge,  R.  B.  Bowler,  and  Augustus  Robbins. 

The  object  of  the  call  was  stated  by  the  President.  He  had  received  a  com- 
munication from  W.  W.  Trimble,  Esq.,  of  Cynthiana,  asking  the  appointment  of 
a  director  for  the  county  of  Harrison,  to  supply  the  vacancy  occasioned  by  the 
resignation  of  Gen.  Desha  in  the  Board. 

On  motion,  Resolved,  That  there  is  no  urgent,  indispensable  necessity  for  the 
election  of  a  director  for  Harrison  county,  before  the  next  regular  meeting  of  the 
Board;  therefore  the  matter  is  postponed  to  that  time. 

November  10,  1859. — Board  present,  except  Mr.  Robbins. 
"  The  President  communicated  to  the  Board  the  sale  and  con- 


500  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

firmation  of  the  sale  of  the  road  to  R.  B.  Bowler, — which  was 
ordered  to  be  filed.  On  motion  of  W.  H.  Gedge,  ordered  that 
the  regular  annual  report  be  made,  and  that  the  stockholders  be, 
as  heretofore,  called  together." 

ANNUAL  MEETING  OF  THE  STOCKHOLDERS,  1859. — December 
22. — No  formal  report  was  printed;  but  the  following  is  the 
Cincinnati  Enquirer's  report  (with  a  few  abbreviations  of  imma- 
terial matters),  as  offered  in  evidence  by  the  defendants,  and  made 
an  Exhibit  to  George  M.  Clark's  deposition.  It  contains  parts 
of  the  annual  reports  of  the  officers  ;  namely,  the  President, 
Secretary,  and  Superintendent. 

The  annual  meeting  of  the  stockholders  of  the  Covington  and  Lexington 
Railroad  Company  was  held  at  the  office  in  Covington,  yesterday,  at  11  o'clock, 
and  continued  throughout  nearlj-  the  entire  day.  The  meeting  was  called  to  or- 
der by  Mr.  Levis,  the  President,  when  Judge  Samuel,  of  Paris,  was  appointed 
Chairman,  and  George  M.  Clark  acted  as  Secretary.  The  first  business  in  order 
was  the  reading  of  the  report  of  the  officers,  an  abstract  of  which  we  give  below: 

REPORT  OF  JOHN  T.  LEVIS,  PRESIDENT  OF  THE  ROAD. — Mr.  Levis  submitted 
his  report  to  the  stockholders,  from  which  we  make  such  extracts  as  will  interest 
the  public.  After  stating  the  fact  that  the  stockholders  had  been  informed  at 
the  last  annual  meeting  of  the  difficulties  then  existing  respecting  the  road,  the 
President  says  that  a  committee  of  the  stockholders  was  appointed  to  negotiate 
with  the  creditors  of  the  company,  and  to  report,  in  their  opinion,  the  best  course 
for  the  company  to  pursue.  That  committee  consisted  of  Judge  Carr,  of  Lexing- 
ton, Judge  Samuels,  of  Paris,  C.  Walton,  Esq.,  of  Cynthiana,  and  M.  M.  Benton, 
Esq.,  and  Judge  Kinkead,  of  Covington.  The  committee  met  a  committee  of  the 
creditors  shortly  after  their  appointment,  but  were  unable  to  effect  any  beneficial 
arrangement,  and,  consequently,  dispersed  without  calling  the  stockholders  to- 
gelher  to  hear  the  report. 

The  President  then  rehearses  the  proceedings  in  the  Fayette  Circuit  Court 
up  to  the  sale  of  the  road  (with  which  those  interested  are  already  familiar)  to 
Mr.  R.  B  Bowler,  for  the  sum  of  $2,125,000. 

The  funds  accruing,  less  expenses,  after  the  decree,  until  the  day  of  sale, 
amounting  to  $22.973.54,  were  paid  to  the  Commissioner,  and  the  amount  accrued 
from  the  day  of  sale  to  the  confirmation  was  paid  to  the  purchaser,  and  the  road 
and  its  appurtenances  delivered  over  to  him,  and  are  now  iu  his  possession. 

The  report  gives  the  following  figures:  Total  indebtedness  of  the  company, 
$3,267,53264;  amount  of  the  sale  of  the  road,  $2,125,000;  liability  against  (lie 
company,  $1,142,532.64.  The  means  for  the  payment  of  the  liabilities  are  thus 
enumerated  by  Mr.  Levis:  Income  bonds,  amount  due  from  sundry  stock  sub- 
scriptions, and  bills  receivable,  $198,422.87,  leaving  unprovided  for  §944,109.77. 

Of  the  bills  payable  and  stock  subscriptions,  a  large  proportion  are  worth- 
less, and  they  have  been  taken  into  the  custody  of  the  Kenton  County  Court, 
under  attachment  by  sundry  creditors,  and  a  receiver  appointed  by  the  court  for 
their  collection.  Of  this  large  sum  ($944,109.77),  nearly  the  whole  amount  is 


IN  THE  KENTUCKY  COURT  OF  APPEALS. 


501 


now  due;  and  the  balance  falls  due  February  1,  1860,  the  time  the  last  issue  of 
the  income  bonds  mature. 

In  concluding  his  report,  the  President  remarks: 

"Your  directors  were  aware  at  your  last  annual  meeting,  and  advised  you, 
unless  some  combined  and  vigorous  action  was  taken  on  your  part,  they  could 
not  keep  control  of  the  road.  It  has  now  passed  into  the  possession  of  the  pur- 
chaser, who  has  advertised  that  he  would  return  it  to  your  possession  by  your  re- 
imbursing him  for  his  outlay,  and  relieving  him  from  his  bonds,  which  offer,  by 
his  card,  closes  this  day,  unless  accepted  by  you.  You  now  have  the  whole  case 
before  you  for  your  deliberate  action.  JOHN  T.  LEVIS,  President." 

REPORT  OF  THE  SECRETARY. — George  M.  Clark,  Secretary  of  the  Company, 
gave  a  detailed  exhibit,  accompanied  by  tabular  statements,  of  the  assets  and 
liabilities  of  the  company,  the  earnings,  etc.,  ending  the  5th  of  October,  1859, 
from  which  we  make  the  following  abstract:  , 

[The  ASSETS  of  the  road  were  aggregated  at  $4,375,993-28,  and  the  Liabil- 
ities at  $4,376,993.29.  Net  earnings  for  11  months  5  days,  $227,734.77.] 

Earnings  of  the  Road  for  eleven  months  and  five  days,  ending  October  5,  1858. — 
The  following  tabular  statement  exhibits  the  earnings  of  the  road  for  eleven 
months  and  five  days,  ending  October  5th,  when  the  sale  to  Mr.  Bowler  was  con- 
firmed, with  a  statement  of  the  earnings  for  the  same  time  during  the  previous 
year: 


November, 
December,     . 

January,    . 

February, 

March, 

April,    . 

May,          .         . 

June,     . 

July, 

August, 

September, 

October,  five  days, 


1857. 

$43,966  59 

46,493  90 

1858. 

26,198  12 
23,512  60 
30,912  08 
32,265  90 
37,893  19 
34,174  83 
30,819  76 
41,934  09 
48,165  12 
7,148  56 

$403,484  74 


$46,778  19 
35,908  24 

1859. 

35,978  29 
30,683  23 
38,326  48 
37,638  06 
42,566  02 
37,553  10 
43,650  24 
48,010  37 
52,795  46 
8,933  31 

$458,820  99 
403,484  74 


M'thly  increase. 
$2,811  60 


9,780  17 
7,170  63 
7,414  40 
6,392  16 
4.672  83 
3^378  27 
12,830  48 
6,076  28 
4,630  34 
1,784  75 

$65,921  91 
10,585  66 


M'thly  decrease. 

$10,585  66 


$10,585  66 


$55,336  25        $55,336  25 

[This  table — Exhibit  D  to  the  Secretary's  Report — was  not  published  in  any 
of  the  newspapers  at  the  time,  most  probably  because  not  furnished  to  the  report- 
ers.    It  was  verified  by  the  Secretary,  Mr.  Clark,  and  is  too  important  to  omit :] 

RECEIPTS. 
From  car  and  house  rent,        .         .         .         .         .         .    -  .         .  N 

From  discount  on  bills  paid  and  materials  sold,       ' .         .         .  1,214  44 

From  subscription  to  capital  stock, 

From  United  States  mail  service, 6,648  13 

From  Adams  Express  Company, 8,619 

From  passage,      ..........  155,122  27 

From  freight, 287,493  54 

Balance  on  hand,  November  1,  1858, 6,176  88 

$465,861  40 


502  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

DISBURSEMENTS. 

For  current  running  expenses,  including  balance  due  Nov.  1,  1858,  $253,844  84 

For  coupon  interest, 31,955  00 

Bills  payable, 40,417  70 

For  real  estate,  right  of  way,  and  construction,           .        .        .  81,475  49 

For  old  bank  debts  of  the  company, 71,328  33 

For  amount  paid  S.  J.  Walker  on  final  settlement,       .        .        .  13,557  60 

For  amount  paid  W.  A.  Dudley,  Commissioner,  per  order  of  court,  22,973  54 

Balance  on  hand,  October  5,  1859, 309  00 

$465,861  40 

REPOET  OF  THE  SUPERINTENDENT. — The  report  of  Colonel  C.  A.  Withers,  the 
Superintendent  of  the  road,  was  not  submitted  to  the  meeting,  but  we  were  per- 
mitted to  make  the  following  abstract :  [The  entire  report,  with  the  exception  of 
some  statistics  (in  substance  already  shown),  is  here  given.  Of  it,  the  Road- 
master,  Ralph  N.  Reynolds,  said :  "  I  acquiesce  in  every  word  of  the  report — 
that  it  is  so."] 

COVINGTON,  October,  1859. 

JOHN  T.  LEVIS,  ESQ.,  PRESIDENT:  SIR, — This  road  having  been  sold  under  a 
decree  of  the  Lexington  Circuit  Court,  on  the  5th  day  of  October,  1859,  it  de- 
volves upon  me  to  give  you  a  statement  of  the  operations  of  the  department  under 
my  supervision,  for  eleven  months  and  five  days,  up  to  the  5th  of  October,  1859. 
I  therefore  respectfully  submit  the  following  report: 

The  operating  expenses  upon  the  earnings,  including  the  rent  of  other  roads, 
amounts  to  fifty  and  three-tenths  per  cent;  not  including  rents  of  other  roads, 
forty-two  and  two-tenths  per  cent.  The  cost  of  repairs  to  locomotives,  including 
oil,  tallow,  waste,  etc.,  is  six  and  four-tenths  cents  per  mile  run.  Our  passenger 
and  freight  business  has  been  done  with  great  regularity,  and,  I  believe,  to  the 
satisfaction  of  the  patrons  of  the  road.  It  gives  me  much  pleasure  again  to  say, 
that  no  passenger  has  ever  been  seriously  injured  on  this  road. 

Road. — The  road  is  now  in  good  condition,  hftving  been  much  improved  by 
the  large  amount  of  ballasting  distributed  on  the  line  during  the  year,  in  clean- 
ing out  the  ditches,  and  keeping  up,  as  far  as  practicable,  a  thorough  drainage, 
and  removing  land-slides,  and  raising  embankments  with  the  earth  removed. 
Owing  to  the  peculiar  nature  of  the  soil  through  which  the  road  passes,  and  the 
very  large  number  of  cuts  and  fills,  a  heavy  expenditure  will  be  required  for 
years  to  come,  in  the  way  of  ditching-trains,  to  keep  up  a  thorough  drainage, 
and  removing  land-slides.  During  the  year  there  has  been  8,082  days'  labor  in 
cleaning  out  ditches,  5,465  days'  in  ballasting  track,  and  4,002  days'  in  removing 
land-slides.  Ten  thousand  new  ties  have  been  put  in  during  the  year,  and  twenty 
thousand  more  will  be  required  the  ensuing  year,  to  keep  up  the  track.  The  iron 
from  Paris  to  Falmouth  is  in  good  condition,  with  the  exception  of  a  portion  of 
the  road.  Below  Falmouth  it  is  in  bad  order,  and  requires  renewal.  Two  hun- 
dred tons  of  new  iron,  with  the  old  iron  that  has  been  taken  up,  which  should  be 
re-rolled,  will  be  required  to  supply  the  place  of  the  defective  iron. 
Car*. — The  company  own  : 

10  Passenger-cars.  4  Baggage-cars. 

150  Box  Freight-cars.  55  Platform-cars. 

8  High  R:ick-cars,  20  Hand-cars. 

16  Dump-cars.  2  Rubble-cars. 

Our  passenger  and  bnggage  cars  have  been  in  use  for  a  long  time ;   and 
having  no  sheds  to  protect  them  from  the  weather,  they  have  suffered  greatly 


IN  THE  KENTUCKY  COURT  OF  APPEALS.     f  503 

from  decay  of  timber  and  other  materials.  During  the  year  four  passenger-cars 
have,  with  the  exception  of  tops  and  floors,  been  entirely  rebuilt,  repainted,  etc. 
at  a  cost  of  one  thousand  to  twelve  hundred  dollars  each.  Ten  new  platform 
cars  have  been  built  at  your  shops  during  the  year ;  five  of  them  have  replaced 
a  like  number  worn  out  and  broken  up,  leaving  a  net  increase  of  five  cars  over 
last  year. 

Engines. — The  Company  own  six  heavy  freight-engines,  seven  light  freight 
and  passenger  engines,  and  one  switching-engine ;  in  all,  fourteen,  all  of  which 
are  in  running  order.  Miles  run  during  the  year,  268,984;  increase  over  last 
year,  10,355  miles. 

Bridges. — The  bridges,  with  a  few  exceptions,  have  been  in  use  six  or  seven 
years,  all  that  time  exposed  to  the  weather,  none  of  them  having  been  covered, 
except  the  one  recently  built  at  Bowman  Creek.  A  number  of  the  bridges  re- 
quire immediate  attention.  I  would  recommend  the  rebuilding,  the  coming  year, 
of  all  the  bridges  on  the  road,  except  the  Falmouth  bridge,  one  above  Cynthiana, 
one  at  Paris,  and  the  Bowman  Creek  bridge. 

I  must  again,  respectfully,  call  your  attention  to  the  great  importance  of 
commencing  at  once  the  filling  of  Townsend  Valley,  as  the  present  structure  will 
not  be  safe  to  run  over  much  longer. 

Construction. — The  extraordinary  expenses  of  the  year  have  been,  eight  hun- 
dred feet  of  side-track  put  down  at  Lexington,  and  new  cattle-pens ;  at  Cynthiana, 
one  thousand  feet  of  side-track,  and  new  water-house,  and  engine  for  pumping 
water;  enlarging  water-station  at  Falmouth,  and  additional  tank;  six  hundred 
feet  side-track  at  Catawba;  one  thousand  feet  of  side-track  at  Covington;  and 
platform  for  loading  coal. 

For  further  statements  in  relation  to  the  working  of  the  road,  I  would  re- 
spectfully refer  you  to  the  tabular  statements  accompannying  this  report.  All 
of  which  is  respectfully  submitted.  C.  A.  WITHERS,  Superintendent. 

After  the  reading  of  the  reports  of  the  officers,  the  meeting  adjourned  until 
2  o'clock  in  the  afternoon.  Previous  to  the  reassembling,  the  leading  stockholders 
held  a  meeting,  and  agreed  upon  a  ticket  to  be  submitted,  which  included  but  two 
of  the  old  directory,  Mr.  John  B.  Casey,  of  Covington,  and  Mr.  Edward  Oldham, 
of  Fayette.  These  were  subsequently  stricken  out,  and  an  entire  new  Board 
elected. 

Some  gentlemen  suggested  that,  as  this  was  an  "  anti-Bowler  meeting,"  it 
would  be  proper  for  any  gentleman  named  in  the  list,  who  belonged  to  the  other 
side,  to  state  his  position.  [Mr.  Oldham  ask,ed  to  be,  and  was,  excused  from  serv- 
ing as  a  director.] 

Afternoon  Session. — At  the  opening  of  the  meeting  in  the  afternoon,  M.  M. 
Benton,  Esq.,  of  Covington,  moved  that  the  report  of  the  officers  be  received  and 
approved,  but  subsequently  modified  his  motion  so  as  to  receive  it  only. 

Mr.  Zinn,  of  Cincinnati,  said  it  was  hard  to  ask  men  to  approve  a  report, 
who  claimed  that  their  property  had  been  sold  and  sacrificed.  He  was  willing 
that  a  vote  of  thanks  to  the  officers  should  be  passed,  but  did  not  like  to  vote  to 
approve  the  report. 

Mr.  Benton  had  no  desire  to  commit  the  stockholders  to  the  policy  of  the 
Board,  but  only  wished  an  indorsement  of  the  facts  presented. 

Mr.  Eggleston,  President  of  the  Cincinnati  Council,  who  had  been  authorized 
to  vote  upon  the  stock  held  by  the  city,  said  it  was  asking  too  much  to  require 


504  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

Cincinnati  to  approve  of  the  acts  of  the  Board  of  Directors.  He  could  not  con- 
sent, as  the  representative  of  the  city,  to  thank  the  officers  for  selling  out  their 
all  in  the  road.  It  was  more  than  he  could  swallow.  The  directors  may  have 
done  just  right — he  could  not  say,  upon  the  limited  information  he  possessed,  that 
they  had  not — but  the  results  were  bad,  very  bad. 

Dr.  Stevenson  moved  to  refer  the  reports  to  a  committee,  to  report  to  an 
adjourned  meeting  on  the  24lh  of  January. 

Mr.  Benton  denied,  in  sharp,  earnest  language,  that  Cincinnati  was  a  stock- 
holder in  the  road,  and  objected  to  Mr.  Eggleston's  speaking  at  a  meeting  of 
stockholders.  The  city  was  simply  a  creditor,  and  held  $200,000  of  stock  as 
collateral  security  only.  .  .  .  The  report  was  simply  a  statement  of  facts, 
and,  if  the  stockholders  refused  to  indorse  them  as  correct,  then  they  impeach 
the  integrity  of  the  officers.  Let  him  who  dare,  attempt  to  impeach  a  single  act 
in  the  administration  of  the  directory,  from  the  commencement,  and  an  issue 
would  be  raised  quicker  than  the  doubter  supposed. 

Judge  Mooar,  of  Covington,  advocated  the  reference.  It  was  impolitic  to 
hurry  a  vote.  He  was  anxious  to  save  the  feelings  of  the  directory.  One  strong 
reason  why  the  reports  should  not  be  received  by  the  Board  was  the  fact  that  the 
case  was  still  pending  in  the  Court  of  Appeals.  If  he  had  lost  his  money,  he  still 
had  the  right  to  vote  not  to  receive  the  report. 

Colonel  John  W.  Finnell,  of  Covington,  eloquently  defended  the  integrity  of 
the  Board  of  Directors.  They  had  his  entire  sympathies.  He  knew  that  some 
of  them  had  been  completely  borne  down  in  their  efforts  in  behalf  of  the  road, 
and  it  was  no  more  than  a  simple  act  of  justice  that  the  facts  which  they  pre- 
sented should  be  received  as  true.  ...  He  was  willing  to  take  the  report  as 
the  man  in  the  Frankfort  Penitentiary  took  the  Gospel  of  Paul.  He  bad  n't  read 
it,  and  didn't  exactly  understand  it,  but  he  had  heard  that  Paul  was  a  remark- 
ably clever  fellow. 

Mr.  W.  Mooar  followed,  and  disclaimed  any  intention  to  impute  any  dishon- 
esty to  the  directory ;  but  he  believed  the  errors  they  might  have  committed  were 
those  of  the  head,  and  not  of  the  heart.  They  were  strangers  to  the  business,  and 
it  was  not  remarkable  that  they  should  have  made  some  mistakes.  He  believed 
that,  when  the  Board  found  themselves  personally  involved  for  the  road,  that  they 
had  forced  the  securities  into  the  market  at  ruinous  rates,  for  the  purpose  of  re- 
imbursing themselves.  The  stockholders  were  unwilling  to  have  all  their  prop- 
erty sacrificed  to  pay  the  face  of  securities  that  were  put  into  the  hands  of 
sharpers  at  ruinous  rates.  He  was  informed  that  not  a  single  director  had  paid 
a  dollar  of  his  private  means  for  the  benefit  of  the  road. 

Mr.  Eggleston  attempted  to  speak  on  behalf  of  Cincinnati,  but  was  objected 
to  on  the  ground  as  previously  stated.  He  was  finally  permitted  to  proceed,  out 
of  courtesy.  .  .  .  Mr.  E.  proceeded  to  say,  that  every  argument  used  here 
satisfied  him,  more  and  more,  that  there  was  something  rotten.  In  the  face  of  in- 
creased receipts,  and  a  prosperous  business,  the  road  has  been  sold  out.  .  .  . 

General  Desha  followed  in  an  explanation  of  the  vote  he  should  give  on  the 
motion  to  refer.  In  voting  in  the  affirmative,  he  did  not  intend  to  cast  any  impu- 
tation upon  the  integrity  of  the  Board.  While  a  member  of  the  directory,  they 
had  been  his  associates,  and  he  had  no  disposition  to  impeach  their  integrity. 

The  motion  to  refer  the  reports  to  a  committee,  to  report  at  an  adjourned 
meeting  on  the  24th  of  January,  was  then  carried  by  a  very  decided  majority. 
The  Chairman  appointed  the  following  gentlemen  as  such  committee:  Peter  Zinn, 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  505 

of  Cincinnati;  Dr.  Stevenson,  of  Covington;  General  L.  Desha,  of  Harrison;  Wm. 
C.  Lyle,  of  Bourbon;  Richard  Stowers,  of  Pendleton ;  and  Judge  C.  D.  Carr,  of 
Fayette. 

Election  of  Directors. — The  meeting  then  proceeded  to  the  election  of  a  Board 
of  Directors,  which  resulted  as  follows :  A.  L.  Greer  and  E.  T.  Clarkson,  of  Cov- 
ington ;  Richard  Stowers,  of  Pendleton ;  G.  H.  Perrin  and  Joseph  Shawhan,  of 
Harrison;  William  C.  Lyle  and  B.  J.  Clay,  of  Bourbon;  C.  D.  Carr,  of  Fayette; 
and  Peter  Zinn,  of  Cincinnati. 

ABSTRACT  OF  PLAINTIFF'S  EVIDENCE. 

DR.  JOHN  E.  STEVENSON.— Member  of  the  City  Council  of 
Covington  from  1857  to  1861,  and  as  chairman  of  the  committee 
for  that  purpose,  consisting  of  C.  H.  Mooar,  I.  N.  Longacre,  and 
himself,  cast  the  vote  of  that  city  on  its  stock  at  the  election  of 
directors  in  December,  1859.  He  gave  a  somewhat  similar  ac- 
count of  the  meeting  to  that  of  the  Cincinnati  Enquirer,  besides 
this  additional  incident : 

"  Mr.  Foley  came  to  me,  and  asked  me  to  step  out  into  the  hall  with  him.  I 
did  so.  He  asked  me  what  I  intended  to  do.  I  told  him  I  intended  to  oppose  the 
acceptance  of  the  report,  and  to  favor  the  electing  a  new  set  of  directors  of  the 
Covington  and  Lexington  Railroad.  He  said  he  thought  I  ought  not  to  do  so; 
that  these  men  were  my  friends  and  acquaintances,  and  I  had  better  not  do  it. 
I  replied  to  him,  that  it  was  my  duty — my  sworn  duty  to  do  so;  that  I  had  been 
sent  there  by  the  City  Council  to  vote  their  stock,  and  I  must  protect  the  interest 
of  the  city,  and  I  intended  to  do  so.  He  again  urged  me  not  to  do  so,  and  I  told 
him  I  should;  and  he  then  left  me,  saying  I  could  do  as  I  liked." 

After  the  sale,  several  eminent  attorneys  sent  communica- 
tions to  the  Council,  advising  that  the  sale  was  illegal,  and  pro- 
posing suit.  Witness  urged  u  upon  the  Council  several  times 
the  necessity  of  employing  counsel  to  look  after  the  city's  in- 
terest in  said  road,  but  could  not  obtain  concert  of  action,  in 
consequence  of  opposition,"  "  some  members  of  the  Board  oppos- 
ing the  measure,  chief  among  whom  was  the  President,  Mr. 
William  Ernst." 

Witness  further  said :  That  so  far  as  his  knowledge  ex- 
tended, after  Mr.  Bowler  became  a  director,  "he  appeared  to 
be  the  leading  spirit  in  the  management  of  the  road,  and  he  was 
so  regarded  by  the  community." 

WILLIAM  H.  CLEMENT. — From  1844  to  1857,  Superintendent 
and  Engineer  of  the  Little  Miami  Railroad — from  the  latter  date 
until  1860,  General  Superintendent  of  the  Ohio  and  Mississippi 
Railroad,  and  from  that  time  until  1867,  President  of  the  Little 


506  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

Miami  Railroad  Company.  At  the  request  of  the  President  of 
the  Covingt6n  and  Lexington  Railroad  Company,  in  the  Autumn 
of  1858,  he  made  an  examination  of  the  entire  road.  In  addi- 
tion to  "his  personal  examinations  of  track  and  bridges,  he  had 
"estimates  and  examinations  made  by  a  competent  engineer.'' 
He  referred  to  his  REPORT  AND  ESTIMATES,  which  he  made  at 
the  time,  for  particulars,  and  the  same  is  appended  in  full. 
Being  asked  to  draw  a  comparison  between  the  Little  Miami,  at 
the  time  he  took  control,  and  the  Covington  and  Lexington,  at 
the  time  he  made  his  examination,  he  made  answer  as  follows : 

"At  the  time  I  took  charge  of  the  Little  Miami  Road,  as  Superintendent,  it 
was  laid  with  a  strap-rail  on  wooden  stringers.  It  was  unballasted,  and  other- 
wise what  would  now  be  considered  in  a  very  unsafe  condition.  The  company 
was  almost  without  credit,  and  the  road  was  shortly  after  placed  in  the  hands  of 
a  trustee,  in  order  to  prevent  its  property  from  being  sacrificed  for  the  benefit  of 
its  creditors.  At  the  time  I  examined  the  Covington  and  Lexington  Railroad,  it 
was  laid  with  a  good  T  iron,  and  in  every  other  respect  it  was  in  much  better 
condition  than  the  Little  Miami  Railroad  at  the  time  I  refer  to.  I  refer  to  track, 
iron,  bridges,"  etc. 

CINCINNATI,  0.,  October  8,  1858. 

JOHN  T.  LEVIS,  ESQ.,  PRES.  KT.  CENTRAL  R.  R.,  Covington,  Ky.: 

DEAR  SIR, — In  compliance  with  the  request  contained  in  your  note  of  the 
26th,  I  have  made  such  personal  examination  of  your  road  between  Covington 
and  Paris,  as  an  outward  trip  by  the  regular  passenger-train,  and  return  trip 
by  special  train,  running  slowly,  and  stopping  at  such  points  as  I  desired,  would 
allow ;  and  have  also  obtained  from  the  officers  of  the  company,  and  by  the  aid 
of  a  competent  civil  engineer,  employed  for  that  purpose,  other  needful  informa- 
tion, and  submit  the  following  statement  of  its  condition,  together  with  an  esti- 
mate of  the  cost  of  completing  the  road,  for  your  consideration.  In  making  up 
the  estimate,  I  have  confined  myself  to  what  I  supposed  to  be  the  substantial 
wants  of  the  road,  believing  that  a  good  track,  sufficient  equipment  for  the  busi- 
ness, and  necessary  conveniences  for  working  the  trains  with  safety,  regularity, 
and  economy,  are  of  more  consequence  to  its  future  success  than  extensive 
structures  for  depot  purposes,  which  under  other  circumstances  might  be  found 
desirable.  I  found  the  road-bed  and  masonry  substantially  constructed,  and 
generally  in  good  condition.  Some  few  of  the  bridge  landings  have  not  been  en- 
tirely filled  up,  short  pieces  of  trestle-work  having  been  used  as  a  substitute  for 
earth,  from  fear  that  the  masonry  of  the  abutments  might  be  injured  by  the 
pressure  of  the  embankments  while  the  work  was  new.  Now  that  the  embank- 
ments have  become  fully  settled,  I  do  not  think  any  danger  need  be  apprehended 
from  this  cause,  if  the  work  is  carefully  done.  The  embankments  and  excava- 
vations  are  generally  of  ample  width  and  up  to  grade,  but  in  some  places  require 
an  enlargement.  The  amount  of  work  in  this  particular,  as  well  as  at  the 
bridge-landings,  is  unimportant,  as  the  earth  taken  from  the  ditches  and  slips, 
which  at  places  need  attention,  will  furnish  all  the  materials  required  for  this 
purpose  at  a  cheap  rate. 

At  some  points  nlong  Licking  River,  slides  of  considerable  importance  occur 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  507 

during  long  periods  of  wet  weather;  careful  watching  at  such  times  would  pre- 
vent danger  to  trains  from  this  cause;  and  the  extra  expense  of  maintaining  the 
road  on  that  account  will  be  inconsiderable.  I  would  not  advise  any  large  out- 
lay to  obviate  this  difficulty,  as  the  slides  occur  only  at  long  intervals  of  time, 
and  the  ordinary  modes  of  prevention,  from  the  nature  of  the  ground,  would  be 
of  but  little  service.  An  abundant  supply  of  limestone,  of  an  excellent  quality 
for  ballast,  is  found  upon  the  road.  Between  Covington  and  Falmouth,  the  ex- 
cavations and  some  portions  of  the  embankments  are  ballasted,  or  the  material 
is  upon  the  ground  for  that  purpose.  Between  Falmouth  and  Paris  this  work  is 
mostly  done,  and  no  unreasonable  delay  need  occur  in  perfecting  the  track,  in 
this  important  particular,  on  account  of  a  want  of  material.  The  iron  rail  is  in 
much  better  condition  than  I  had  been  led  to  expect  by  common  report,  and  will 
compare  favorably  with  that  on  other  roads  in  this  section  which  have  sustained 
a  corresponding  traffic.  Sufficient  care  has  not  been  taken  in  keeping  up  the 
joints  of  the  rails,  and  removing  promptly  defective  bars,  which  has  doubtless 
given  rise  to  the  impression  that  the  iron  was  in  much  worse  condition  than  it 
proves  to  be  in  fact.  This  is  now  receiving  attention,  and  will  be  guarded 
against  in  future. 

In  consequence  of  the  neglect  to  curve  the  bars  before  placing  them  in  the 
track,  when  it  was  originally  laid,  and  the  bars  not  being  cut  so  as  to  bring  the 
joints  opposite  to  each  other,  it  is  much  more  difficult  to  keep  the  track  in  order 
than  it  would  be  otherwise,  and  increase  materially  the  wear  of  iron.  This  de- 
fect is  also  being  remedied  as  rapidly  as  circumstances  will  admit.  Forty-one 
miles  of  the  track  is  laid  with  English  iron,  and  thirty-nine  miles  with  iron  of 
American  manufacture.  The  English  iron  appears  to  be  of  a  better  quality  than 
the  American.  I  have  estimated  for  five  hundred  (500)  tons  of  new  rails,  to  re- 
place defective  bars,  extend  side-tracks,  and  allow  of  a  sufficient  stock  on  hand 
for  repairs.  In  this  I  include  one  hundred  and  twenty  (120)  tons  already  deliv- 
ered, and  think  the  allowance  ample.  The  rail  is  not  fully  spiked  on  the  inside 
of  the  bar,  and  I  have  estimated  for  fifteen  tons  of  spikes  for  this  purpose,  and 
replacing  rails  and  extending  side-tracks.  About  twenty-five  per  cent  of  the  ties 
require  renewal;  but  as  I  am  informed  the  company  have  a  sufficient  number  on 
hand  for  this  purpose,  I  have  left  it  out  of  the  estimate. 

The  bridges  are  in  as  good  condition  as  could  be  expected  from  the  length 
of  time  they  have  been  in  use,  without  protection  from  the  weather.  All  will 
require  renewal  within  the  next  three  years,  with  the  exception  of  the  new 
bridge  nt  Falmouth,  and  this  should  be  whitewashed  and  covered  without  delay. 

It  is  certainly  a  misfortune  that  your  company,  in  common  with  many 
others,  had  not  the  means  to  cover  your  bridges  at  the  proper  time,  as  a  large 
outlay,  which  must  now  be  made,  might  have  been  avoided  for  many  years  to 
come. 

With  careful  attention,  and  additional  bracing  from  time  to  time,  I  think 
the  period  of  renewal  may  be  extended  through  two,  and  possibly  three,  years. 
This  will  afford  material  relief  from  the  burden  which  you  will  be  compelled 
to  bear. 

I  have  allowed  for  increased  strength  in  the  structures,  and  have  also  made 
a  separate  estimate  for  an  iron  bridge  at  Townsend.  I  think  the  trestle-work  at 
that  place  should  be  filled  up,  commencing  by  taking  earth  from  the  bottom-lands 
adjoining,  and  after  this  source  of  supply  becomes  exhausted,  or  too  expensive, 
hauling  the  remainder  by  trains.  A  structure  of  even  stone  or  iron  over  the 


508  COV.  &   LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

entire  valley  would  be  liable  to  accidents,  which  an  embankment  is  not,  and, 
independent  of  the  first  cost,  which  would  be  greater,  would  become  an  annual 
tax  upon  the  revenues  for  repairs. 

By  commencing  this  work  now,  and  prosecuting  it  steadily,  the  present 
structure,  with  some  additional  repairs,  may  be  used  for  the  passage  of  trains 
until  the  embankment  is  completed;  but  if  it  is  delayed  much  longer,  the  whole 
must  be  rebuilt: 

The  same  argument  will  apply  to  the  trestle-work  at  Stoner  Creek,  and  I 
think  to  the  bridge  at  Paris ;  but  I  have  not  examined  the  last  locality  with  suf- 
ficient care  to  satisfy  mj'self  as  to  the  best  plan  to  be  adopted,  and  have,  there- 
fore, estimated  for  renewing  the  present  bridge  by  a  similar  structure. 

A  good  wooden  bridge,  secured  from  fire  by  a  wash  of  lime,  salted,  and  prop- 
erly protected  from  the  weather,  will,  without  a  doubt,  last  from  twenty  to  twenty- 
five  years,  and  in  the  end  prove  more  economical,  to  companies  of  limited  means, 
than  structures  of  a  more  permament  and  costly  character. 

I  have  made  no  estimate  for  depot  buildings  or  lands,  other  than  for  three 
principal  water-stations.  The  timber  from  bridges  needing  renewal  will  furnish 
an  ample  supply  for  the  erection  of  car-sheds,  wood-sheds,  and  all  the  smaller 
station-houses  on  the  road,  and  I  suppose  the  more  important  structures  will  not 
be  undertaken  at  the  present  time. 

It  is  due  to  your  Superintendent  to  state,  that  the  plans  he  had  adopted  and 
was  pursuing,  for  replacing  the  defective  iron,  ballasting  the  road,  renewing 
bridges,  and  erecting  water-stations,  are  substantially  those  I  have  recommended, 
and  which  I  have  no  doubt  will  be  found  the  most  economical  and  judicious  for 
the  company  to  carry  out.  Respectfully,  W.  H.  CLEMENT,  C.  E. 

Estimate  for  completing  the  Kentucky  Central  Railroad^  between   Covlngton  and  Paris, 
and  for  renewing  bridges,  etc. 

600  tons  new  iron,  for  replacing  defective  rails,  extending  side-tracks, 

and  allowance  for  stock  on  hand  for  repairs,  at  $55  per  ton,         .       $27,500 

Spikes  and  chairs,      .        .         . 2,000 

For  completing  ballasting,  opening  ditches,  enlarging  excavations  and 
embankments,  and  filling  bridge-approaches,  exclusive  of  labor 
of  ordinary  repair-force, 20,000 

For  renewing  3,201  lineal  feet  of  Howe  truss-bridge — exclud- 
ing Falmouth  bridge, $56,700 

Less  20  per  cent  value  iron  rods,  and  other  materials  that  can 

be  used  again, 11,340 —     45,360 

Add  for  covering  3,201  feet  of  bridge,  at  $5, 16,005 

Filling  trestle-work  at  Townsend: 

40,000  cubic  yards  to  be  carted  from  side,  at  18  cents,       $7,200 

20  acres  of  burrowing-ground, 2,000 

96,000  cubic  yards  to  be  handled  by  cars,  at  25  cents,       24,000 

2,560  yards  masonry,  stone  mainly  prepared,  at  $5,      .    12,600 —      45,700 

Covering  Falmouth  bridge,  225  feet,  at  $5, 1,275 

3  water-stations,  worked  by  steam  and  fitted  up  for  sawing  wood,  at 

$3,000  each, 9,000 

2  freight-engines,  at  8,000  each, 16,000 

(The  company  own  13 — every  one  in  running  order.) 

21  freighters,  at  $600  each, 12,600 

$195,440 
To  which  may  be  added,  if  iron  bridges  at  Townsend  are  adopted,      .          11,276 

$206,716 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  509 

If  a  trestle-work  is  substituted  at  Townsend  for  trestle-work  again, 

it  will  reduce  this  estimate  to $160,440 

If  it  is  decided  that  the  machinery  now  on  the  road  will  answer  the 

present  purposes  of  the  company,  the  estimate  will  be  reduced  to  131,840 

ERASMUS  GEST. — Wished  it  understood  that  he  was  an  un- 
willing witness.  A  civil  engineer  by  profession  ;  had  experience 
as  a  contractor  in  railroads,  as  a  superintendent  and  receiver. 
At  the  time  of  giving  his  deposition  was  President  and  general 
manager  of  the  Cincinnati  and  Zanesville  Railroad.  In  the 
year  1858,  he  made  an  examination  of  the  condition  of  the  road 
with  a  view  of  securing  a  lease  thereof,  in  regard  to  which  he 
says: 

"I  can  not  recollect  the  detail  of  what  then  passed.  My  communications 
were,  I  think,  mainly  with  Mr.  Bowler,  who,  if  I  remember  correctly,  was  tho 
Executive  Committee,  or  chairman  of  such.  I  made  one  or  more  in  writing. 
After  some  weeks,  I  found  a  hitch  in  the  business — that  I  was  avoided,  although 
on  several  occasions  the  interviews  were  terminated  by  Mr.  Bowler's  statement 
that  he  would  send  for  me,  or  see  me  again.  I  really  do  not  think  I  had  to  do 
with  any  of  the  other  directors  or  officers,  as  I  understood  the  business  was  left 
almost  entirely  with  him,  he  having  such  a  large  individual  interest  in  the  prop- 
erty or  its  securities.  .  .  .  I  at  some  period  either  before  the  sale,  or  subse- 
quent, but  before  the  confirmation,  made  a  formal  proposal  to  lease  the  property. 
If  this  formal  offer  was  made  before  the  sale,  then  it  was  made  to  Mr.  Bowler:  if 
after,  and  before  confirmation,  I  think  to  General  Coombs,  or  some  one  acting  with 
him.  In  either  event,  the  substance  was  formally  made  to  Bowler." 

The  witness  identified  a  copy  of  his  proposition  to  lease  the 
road,  and  made  the  same  an  exhibit  to  his  deposition.  It  can 
be  found  on  pages  188—9  of  the  printed  record,  and  was,  in  sub- 
stance, to  lease  the  road  for  ten  years,  and  during  that  time  to 
pay  all  interest  and  debts  of  the  road  as  they  matured — keep 
the  road  in  repair,  and  make  such  additions  thereto  as  circum- 
stances or  increase  of  business  might  require — all  from  the 
earnings  of  the  road ;  if  they  were  not  sufficient,  to  advance 
the  necessary  means  therefor,  and  at  the  end  of  the  term  the 
same  to  be  a  debt  against  the  road,  to  be  settled  by  bonds  or 
otherwise,  as  might  be  agreed  upon.  "  It  was  my  judgment 
that  the  road  could  be  made  to  pay  its  interest  on  its  funded 
debt  promptly  ;  likewise,  the  accruing  interest  on  its  floating 
debt,  as  well  also  as  the  principal  of  the  floating  debt,  in  period- 
ical payments  running  through  the  duration  of  lease.  In  addi- 
tion to  which,  also  the  working  expenses,  taxes,  and  a  large 
compensation  to  myself." 


510  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

R.  M.  SHOEMAKER. — Civil  engineer  and  railroad- builder,  and 
was  so  engaged  since  1833.  Was  chief  engineer  of  the  road 
from  June,  1852,  to  the  Summer  of  1854.  After  leaving  the 
road,  he  became  the  owner  of  $25,000  or  $30,000  of  its  second 
mortgage  bonds;  and  was  one  of  the  committee  with  Henry 
Hanna,  William  Ernst,  and  William  B.  Smith,  to  confer  with 
the  directors  in  regard  to  the  non-payment  of  interest  past  due. 
Witness  went  with  committee  over  the  road  (Mr.  Bowler  accom- 
panying them),  to  examine  its  condition,  and  to  confer  with  the 
directors  and  their  attorney  at  Lexington.  "  Mr.  Bowler  claimed 
to  be  a  large  bondholder,  was  a  director,  and  was  the  leading 
man  in  the  company,  so  far  as  I  could  see."  The  committee 
were  disposed  to  indulge  the  company,  but  received  no  other 
proposition,  in  return,  that  witness  recollected,  except  the  terms 
of  the  "  $800,000  circular."  He  recollected  that  in  passing 
over  the  road,  Bowler's  general  tone  was  more  disparaging  than 
the  condition  of  the  road  justified.  Mr.  Shoemaker  further  said : 

"I  did  not  make  any  specific  estimate  myself,  nor  do  I  think  the  committee 
did;  but  we  had  handed  to  us  (by  the  President  of  the  railroad  company,  I  think) 
a  report  of  Mr.  Clement,  which  contained  an  estimate  of  the  cost  of  putting  the 
road  in  good  repair,  which  I  had  in  my  possession  most  of  the  time  while  passing 
over  the  road;  and  from  my  former  knowledge  of  the  road  and  reading  that  report, 
and  examining  the  road  as  I  rode  over  it,  I  was  satisfied  that  Mr.  Clement's  esti- 
mate was  very  liberal,  and  that  the  road  could  have  been  put  in  good  running 
order  for  less  than  the  amount  estimated  by  him." 

RALPH  N.  REYNOLDS. — Commenced  railroading  in  1851,  and 
had  continued  in  that  business  up  to  the  time  of  taking  his  depo- 
sition, when  he  was  Assistant  Superintendent  of  the  Nashville 
and  Decatur  Railroad.  Was  Roadmaster  on  the  Covington  and 
Lexington  road  from  August,  1857,  until  January,  1864,  and  as 
such,  had  charge  of  the  track  and  all  matters  connected  with  it, 
the  purchase  of  wood  and  ties.  When  witness  took  control,  the 
road  was  very  much  out  of  repair;  but  it  improved  rapidly  af- 
terward, in  ballasting,  new  ties,  and  ditching.  At  first  the 
wages  of  the  workmen  were  not  paid  regularly,  and  the  credit 
of  the  company  was  not  good  ;  but  soon  after,  the  wages  were 
paid  promptly,  as  well  as  the  cost  of  all  supplies  of  wood  and 
ties.  The  credit  of  the  road  became  good,  and  "  before  the 
sale  of  the  road  I  could  get  credit  for  any  thing  we  wanted." 
Witness  did  not  recollect  of  being  asked  to  approve  of  the 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  511 

"  $800,000  circular,"  but  if  he  had  have  been,  he  would  have 
declined.  The  Superintendent  was  "  decidedly  against  the  cir- 
cular— that  it  was  unnecessary."  "In  my  judgment,  the  cir- 
cular and  the  sale  were  one  and  the  same  thing — the  one  the 
consequence  of  the  other."  "I  do  not  think  that  the  road  at 
that  time  required  the  expenditure  of  any  such  sum  as  is  set 
out  in  that  circular."  "  I  do  not  think  that  any  such  sum  of 
$800,000  was  required  to  put  the  road  in  first-class  order." 
The  witness  continued :  "  About  the  time  of  the  issuing  of  the 
circular,  I  was  requested  by  Mr.  Bowler  to  substantiate  some 
statements  he  had  made  in  that  document,  which  I  declined  to 
do.  He  asked  me,  '  Did  you  not  tell  me  that  the  track  required 
new  iron  ?'  I  replied,  '  No,  sir.'  He  repeated  the  question,  with 
a  like  answer."  Mr.  Bowler  was  excited  in  his  manner  at  the 
time.  He  "persisted  in  making  figures  to  lay  the  entire  track 
with  new  iron  and  ties.  That  was  not  required."  As  to  the 
u  $800,000  circular,"  witness  repeated,  "  that  it  was  altogether 
unnecessary  to  expend  that  amount  on  the  road.  The  road, 
after  the  sale,  was  kept  and  carried  on  in  the  same  manner  as 
before  the  sale.  The  plan  of  renewing  the  iron,"  by  purchasing 
500  tons  of  new  iron,  and,  after  putting  it  down,  re-rolling  the 
old  iron  taken  up  to  give  place  to  the  new,  and  then  in  turn 
putting  down  the  re-rolled  iron, — this  the  witness  explained  to 
be  the  custom  on  all  roads.  On  cross-examination,  witness 
stated  that  the  character  of  the  soil,  and  the  location  1'equired 
much  labor  on  the  road  while  he  was  connected  with  it  5  that  the 
track  required  additional  ballast,  and  the  depot  accommoda- 
tions not  sufficient.  Nearly  all  the  improvements  after  the  sale 
he  would  classify  as  ordinary  repairs ;  but  the  filling  of  Town- 
send  Valley,  and  the  building  of  one  or  more  bridges  were 
extraordinary. 

J.  B.  VAN  DYNE. — Was  conductor  on  the  road  from  1854  to 
1862,  from  which  time  was  master  of  transportation  until  Jan- 
uary 1,  1864.  Previous  to  his  connection  with  this  road  he  was 
conductor  on  the  Little  Miami  and  the  Ohio  and  Mississippi 
Railroads.  The  witness  thus  describes  the  condition  of  the  road 
at  the  time  of  the  sale : 

"The  general  condition  of  the  road  was  good.  There  was  needed  some  im- 
provements in  the  way  of  warehouses  and  some  renewal  of  iron,  but  the  road 


512  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

could  get  along  for  years  without  any  great  outlay  for  depot  buildings.  The  roll- 
ing stock  at  that  time  was  sufficient  for  the  accommodation  of  the  business.  My 
recollection  is,  that  the  bridges  at  that  time  were  all  in  safe  order,  but  some  of 
them  would  require  renewal  in  the  course  of  a  few  years.  The  condition  of  the 
road  would  compare  favorably,  at  that  time,  with  the  generality  of  the  Western 
ronds.  There  was  some  work  needed  on  the  sides  of  some  of  the  cuts,  in  clearing 
them  out;  but  that  could  be  done  gradually." 

Witness  went  from  the  Ohio  and  Mississippi  to  the  Coving- 
ton  and  Lexington  Railroad,  and  always  considered  the  latter 
the  better  road  of  the  two — it  had  a  Better  road-bed.  At  the 
time  he  left  the  road,  the  track  was  not  as  good  as  when  sold. 
Some  of  the  bridges  were  better.  The  depot  buildings  and 
water-stations  were  not  as  good  as  when  witness  went  on  the 
road.  The  rolling  stock  was  somewhat  increased.  The  loss 
during  the  years  1862  and  1863  from  destruction  of  bridges  and 
rolling  stock  would  certainly  not  exceed  $50,000 ;  and  during 
the  same  period  the  earnings  averaged  from  $65,000  to  $80,000 
per  month.  At  the  time  of  taking  his  deposition  (June,  1868), 
there  were  some  two  hundred  and  fifty  feet  of  the  Townsend 
trestle-work  still  standing.  The  improvement  is  by  filling  and 
masonry.  At  the  south  end  there  was  a  rock  abutment  or  a 
wall.  It  never  was  completed."  "  The  trains  are  carried  over 
this  work  by  trestle."  The  only  difference  between  the  work 
when  sold  and  when  witness's  deposition  was  taken,  was  that 
the  trestle  was  shortened  about  six  hundred  feet.  "  There  were 
no  serious  accidents  on  the  road  previous  to  the  sale ;"  and  it 
compared  favorably  with  the  roads  entering  Cincinnati.  On 
cross-examination,  the  witness  said  that  at  one  point  there  was  a 
place  where  the  road  sank  every  year,  and  had  to  be  raised; 
and  in  cases  of  "very  heavy  rains,"  the  track  was  displaced  for 
a  hundred  feet  out  of  line.  Ordinary  rains  did  not  affect  the 
road.  The  road  was  not  perfectly  ballasted  when  sold ;  and  up 
to  the  present  time  "is  not  thoroughly  ballasted  as  a  first-class 
road."  At  the  time  of  sale,  "  there  was  already  a  depot  in  Cov- 
ington.  It  was  not  a  first-class  house.  I  do  not  know  of  prop- 
erty being  lost  for  want  of  a  secure  place  to  put  it  in." 

The  witness  thought  Mr.  Withers  a  very  discreet  man — "a 
man  of  good  judgment  as  to  the  management  of  the  road."  He 
was  deceased  at  the  time  of  taking  the  deposition.  Mr.  Bowler 
"  was  a  very  active  member — a  very  influential  member  of  the 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  513 

Board."  "  He  seemed  to  have  a  controlling  influence  over  the 
other  members  of  the  Board."  "  The  impression  always  was, 
that  Mr.  Bowler  was  to  be  consulted  before  any  important  action 
was  to  be  taken.  He  was  what  was  known  as  a  controlling 
spirit." 

THOMAS  D.  DAVIS. — Was  master-machinist  from  June,  1855, 
to  1861.  In  1857  and  1858,  the  condition  of  the  machinery  was 
improving.  In  1858,  1859,  and  1860,  it  was  got  in  "pretty 
good  condition.  We  considered  it  sufficient  for  the  business 
offering.  We  had  very  few  break-downs.  When  we  were 
called  on  to  send  an  extra  engine  or  train,  it  was  always  in  con- 
dition to  go  out.  The  machinery  was  getting  better  all  the  time 
the  last  three  years  before  I  left.  It  was  considered  in  good 
condition  when  I  left.  We  made  as  regular  trips  on  the  road 
at  that  time  as  on  any  other  road  in  the  country."  "At  the 
time  the  road  was  sold,  it  was  in  good  condition."  "It  was  in 
about  the  same  condition  when  I  left  that  it  was  at  the  time  of 
sale."  Messrs.  Withers  and  William  H.  Gedge  gave  witness 
orders  to  have  the  machinery  put  in  good  condition  before  the 
sale.  After  the  sale,  Mr.  Gedge  asked  if  expenses  could  not  be 
reduced ;  and  if  so,  to  reduce  them,  as  they  had  a  good  deal  of 
money  to  raise.  A  day  or  two  after  the  sale,  conversed  with 
William  H.  Gedge  about  his  purchase  of  the  road,  when  he  told 
what  was  paid  for  it.  Witness  said  "to  him  that  he  got  it  very 
cheap.  He  said,  Yes  ;  but  he  would  have  paid  a  good  deal  more, 
if  necessary.  He  said,  '  It  was  our  calculation  to  have  the 
road,  anyhow.'"  About  1870,  the  company  had  about  half  the 
property  purchased  from  Walker,  in  use. 

GEORGE  M.  CLARK. — A  civil  engineer  by  profession,  and 
served  in  that  capacity  on  the  road  four  or  five  years,  from 
1850.  Was  Secretary  of  the  company  from  1855  to  1859. 
Was  also  ticket-agent  during  the  latter  three  or  four  years, 
and  kept  a  supervision  of  the  books  of  the  company.  Was 
employed  on  the  road  as  ticket-agent  and  book-keeper  until 
the  Fall  of  1861. 

In  the  years  1857  or  1858,  made  examinations  and  estimates 
as  to  equipment,  ballast,  rails,  and  ties  of  the  road,  which  were 
shown  to  Mr.  Clement,  and  used  by  him.  Witness  also  made 

33 


514  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

the  tables  in  the  annual  reports  of  the  Secretary  for  1859,  and 
verified  their  correctness.  The  $13,557.50  shown  in  the  ex- 
penditures of  1858,  was  a  balance  paid  Samuel  J.  Walker  after 
a  final  settlement  with  him  as  Treasurer  of  the  company. 

Mr.  Bowler  "  seemed  to  take  a  very  active  part  as  director 
of  the  company."  "Was  in  the  office  of  the  company  every 
week,  and  sometimes  every  day,  while  I  was  Secretary  of  the 
road."  "Mr.  Bowler  exercised  a  controlling  influence  over  the 
affairs  of  the  road." 

The  necessity  of  a  depot  in  Covington  was  often  discussed  by 
the  directors,  and  witness  thought  plans  were"  submitted,  by 
which  the  cost  was  to  be  about  $25,000  or  $30,000.  After- 
ward, a  building  was  put  up  for  a  depot  by  a  private  individual, 
and  rented  to  the  company,  with  the  privilege  of  keeping  an 
eating-house  adjoining.  At  the  time  of  taking  the  deposition 
^January,  1869),  the  passenger-trains  stopped  in  Washington 
Street,  opposite  the  depot  mentioned.  ll  Previous  to  the  sale,  the 
cars  stopped,  as  now,  in  the  street,  but  further  north,  and  no 
rooms  were  then  provided  for  the  passengers. 

On  cross-examination,  Mr.  Clark  said  "  the  original  contracts 
made  for  the  construction  of  the  road  were  at  a  very  low  figure  ;" 
and,  so  far  as  he  had  "  experimental  knowledge,  no  road  of  equal 
difficulties  had  ever  been  graded  at  less  cost."  u  The  equipage 
of  the  road  was  made  at  very  favorable  terms ;  and,  on  the 
whole,  I  can  not  believe  the  cost  of  the  road,  including  the 
equipage,  could  have  been  less."  During  its  construction,  the 
company  was  often  short  of  funds,  and  liabilities  were  incurred 
by  the  directors.  On  those  liabilities  the  company  always  paid 
the  discount  and  interest ;  and,  to  the  best  of  witness's  knowl- 
edge, the  $71,328.33,  mentioned  in  the  exhibit  of  expenditures 
for  1859,  paying  off  the  last  of  these  debts.  Bowler  indorsed 
for  the  company,  but  witness  never  knew  of  his  losing  any  thing 
thereby.  The  purchase  of  the  real  estate  from  Walker  was  also 
a  compromise  by  which  the  company  saved  a  large  expenditure 
for  the  construction  of  a  stone  arch  through  the  college-grounds. 

JOHN  T.  LEVIS. — Was  elected  director  in  the  Spring  of  1854, 
and  so  continued  until  December,  1856,  when  he  was  elected 
President,  and  so  continued  until  the  sale.  After  that,  was 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  515 

employed  by  Mr.  Bowler,  and  had  the  general  charge  of  the  road 
until  January,  1861.  At  that  time  "a  company  was  formed, 
consisting  of  R.  B.  Bowler,  James  C.  and  Wm.  H.  Gedge,  R. 
Stowers,  and  myself,  in  which  company  we  all,  except  James  C. 
Gedge,  took  part  in  the  management.  I  continued  therein  until 
January,  1863,  when  the  present  [January,  1869]  company  was 
formed,  and  I  retired  from  the  road."  For  the  terms  of  the 
formation  of  that  company,  Mr.  Levis  referred  to  the  Exhibit 
to  the  Petition — Bowler's  conveyance  to  them.  "  A  separate 
agreement  was  made  with  each  of  the  parties  by  Bowler,  for 
the  interest  owned  by  them.  The  road  was  put  in  as  follows, 
namely  :  The  company  to  pay  all  the  mortgage  bonds,  and  a 
stock  was  made  for  $1,100,  in  stock,  of  which  I  was  to  have 
$20,000.  The  mortgage  indebtedness  was  $1,737,000 — the 
shares  were  $100  each.  The  contract  between  myself  and 
Bowler  was  destroyed  when  I  retired  from  the  road."  There 
was  rolling-stock  put  on  the  road  every  year  witness  was  con- 
nected with  it;  and  in  his  judgment  it  was  always  needing 
more.  During  the  years  1860,  1861,  and  1862,  the  road,  as  to 
economy,  was  managed  "very  closely,  nothing  being  expended 
unnecessarily  in  any  way."  "  The  earnings  of  the  road  con- 
tinued to  increase,  from  the  opening  of  the  road  up  to  the  time 
I  ceased  my  connection  with  it."  Being  asked  the  question  as 
to  what  profits  were  divided  for  the  years  1861  and  1862,  the 
witness  said:  "For  the  year  1861,  a  dividend  of  six  per  cent 
was  declared.  I  can  not  state  if  a  dividend  was  declared  for 
1862;  but  my  recollection  is,  that  the  profits  for  that  year  were 
some  five  per  cent,  but  whether  declared  or  added  to  the  funds 
of  the  road,  do  not  know.  I  got  my  settlement  at  that  rate." 
Mr.  Levis  thought  the  road  less  valuable  when  the  company  was 
reorganized  in  January,  1863,  as  it  had  suffered  from  the  war. 
In  January,  1861,  when  he  took  his  interest  therein,  he 
"thought  it  was  worth  what  it  was  put  in  at;  namely,  $2,837.- 
000."  In  another  part  of  his  deposition,  he  explained  that  his 
retiracy  from  the  road  had  nothing  to  do  with  its  profitableness, 
but  was  owing  to  other  causes.  "  The  effect  of  the  war  was  to 
throw  a  large  transportation  over  the  road." 

The  witness  had  before  him  a  copy  of  his  own  deposition, 
taken  in  the  foreclosure  suit  on  the  9th  of  May,  1859,  and  being 


516  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

asked  as  to  the  floating  debt  at  that  time,  adopted  his  former 
answer  to  the  same  question,  namely : 

"The  floating  debt  of  the  company  is  about  $138,000.  The  directors  are 
bound  on  about  $96,000,  for  which  Walker  has  undertaken  to  pay,  in  the  ar- 
rangement heretofore  referred  to.  In  addition  to  the  above,  the  President  and 
one  of  the  directors  are  bound  on  a  bond  to  the  Kenton  Circuit  Court  for  $4,204, 
bearing  interest  since  March  last.  This  does  not  include  the  amount  for  supplies 
for  the  last  month,  nor  for  the  labor  for  same  time,  amounting  to  $14,573.45." 

Being  asked  in  regard  to  an  estimate  for  running  the  road 
for  two  years,  made  by  himself  at  the  time  of  taking  his  former 
deposition,  and  also  as  to  an  estimate  of  the  yearly  earnings  and 
expenses  of  running  the  road,  also  made  by  him,  and  his  ex- 
planations thereof,  Mr.  Levis  adopted  and  quoted  from  his 
deposition  of  9th  May,  1859,  as  follows: 

It  will  require,  for  depot  buildings,  offices,  and  side-track,  and  paving 

around  depot  at  Covington,  about                                          V  $25,000 

Five  hundred  tons  new  railroad  iron,  $60, 30,000 

Repairs  bridges  along  the  line,  say 20,000 

Depot  and  repairs  of  ground  at  Lexington, 10,000 

Depot-ground  at  Lexington, 2,000 

Ballasting  road, 20,000 

Filling  up  Townsend  Valley, 60,000 

Two  new  engines,  $8,000, 16,000 

Twenty  freight-cars.  $650, 19,500 

Two  wood-houses, 1,600 

Two  water-stations,      ..........  6,000 

I  think  it  safe  to  estimate  the  receipts  for  the  year  ending  1860  (Nov.),  475,000 
The  expenses  of  running  and  ordinary  repairs  will  average  about  65 

per  cent  of  earnings;    I  put  it  at  that  time  at  same  price,     .         .  260,000 

"All  of  the  items  named  above  are  necessary  to  the  running  of  the  rond.  I 
do  not  think  any  of  them  can  be  dispensed  with  beyond  the  period  named,  viz.: 
two  years.  Some  of  the  improvements  can  be  dispensed  with,  but  not  with  in- 
terest to  the  company.  The  road  can  run  without  ballasting.  It  can  be  got 
along  with  the  present  machinery  for  a  short  time.  The  trestle-work  at  Town- 
send  could  be  renewed,  as  by  a  similar  one,  but  I  think  it  would  not  be  economy 
to  so  make  the  repairs.  The  original  cost  of  the  trestle-work  at  Townsend  was 
about  $12,000  for  the  wood-work.  Of  the  masonry  I  can  not  state  the  cost.  It 
is  possible  to  run  the  road  without  the  proposed  outlay  for  depots;  but  at  Cov- 
ington it  adds  largely  to  the  cost  of  labor  nnd  damages,  and  most  of  the  work  is 
done  in  the  streets  on  sufferance.  At  Lexington  it  could  get  along  after  a 
fashion,  for  a  time,  better  than  at  Covington,  but  to  great  disadvantage"  (a). 

Mr.  Benton  negotiated  the  sale  of  the  third  mortgage  bonds, 
and  it  was  approved  by  the  directors.  At  the  time,  it  was  dif- 
ficult to  make  sales  of  railroad  bonds. 

(a)  This  deposition,  of  1859,  was  taken  at  the  instance  of  income  bondhold- 
era,  who  resisted  the  sale  of  the  road. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  517 

On  cross-examination,  Mr.  Levis  stated  that  the  affairs  of 
the  road  were  economically  managed,  and  the  road  built  at  low 
prices.  That  in  1857  and  1858  the  road  had  not  the  "means 
to  make  the  necessary  repairs,  supply  it  with  rolling  stock,  pay 
current  expenses,  and  interest  upon  its  bonded  indebtedness. 
He  instanced  a  case  where  the  right  of  way  had  not  been  paid 
for,  between  Paris  and  Lexington.  The  estimates  of  the 
"$800,000  circular"  were  made  after  careful  examination; 
and  he  was  satisfied  they  were  as  low  as  would  be  sufficient  to 
finish  and  make  the  road  first-class ;  and  on  re-examination  in 
chief,  in  answer  to  the  question  if  he  at  that  time  (January, 
1869)  considered  the  road  first-class,  in  regard  to  track,  equip- 
ments, depots,  etc.,  replied  that  he  did  "not  consider  it  a  first- 
class  road  in  any  respect."  The  attention  of  the  stockholders 
was  called  to  the  condition  of  the  road  at  the  annual  meetings. 
In  December,  1858,  Mr.  Bowler  made  a  proposition  to  assess 
the  stock,  to  which  there  was  no  response.  "The  stockholders 
were  made  aware  of  all  the  difficulties  of  the  road,  but  I  do  not 
recollect  the  special  details  made  to  them.  They  were  aware 
of  the  suit  pending  against  the  company."  "  There  was  no  in- 
terest paid,  except  on  the  first  mortgage  bonds,  after  November 
1,  1858.  The  company  had  not  funds  to  pay  the  interest  and 
meet  the  current  expenses  and  repairs  of  the  road,  and  con- 
cluded to  keep  the  road  in  operation,  and  let  the  coupons  pass." 
"Eminent  counsel  was  employed"  in  the  foreclosure  suit,  and 
every  defense  they  could  make  was  made ;  and  witness  never 
knew  or  heard  of  any  simulated  defense  until  after  the  sale  of 
the  road.  "  Bowler  resisted  the  sale  of  the  road,  being  a  large 
stock  and  income  bondholder.  He  wished  to  protect  that  inter- 
est, and  employed  counsel  to  take  care  of  it,  and  desired  a  re- 
ceiver be  appointed  for  the  road."  On  re-examination  in  chief, 
witness  did  not  know  if  Mr.  Bowler's  attorneys  argued  only  as 
to  the  priority  of  his  income  bonds  or  not,  but  thought  it  "  was 
to  prefer  income  bonds,  and  had  nothing  to  do  with  the  mort- 
gage securities."  After  the  sale,  Mr.  Bowler  offered  to  restore 
the  road  to  the  stockholders,  at  cost;  but  what  he  meant  by 
"  cost,"  Mr.  Levis  did  not  know. 

LEWIS  S.  ROSENSTIEL  and  PETER  J.  SULLIVAN  testified  to 
Bowler's  calling  on  them,  and  requesting  them  to  vote  for  him 


518  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

as  director  when  he  was  first  elected,  which  they  did,  or  gave 
him  their  proxies. 

JOSEPH  C.  BUTLER. — Previous  to  the  sale  of  the  road,  he 
owned  between  $50,000  and  $60,000  of  the  third  mortgage 
bonds,  which  he  bought  from  Samuel  J.  Walker,  and  sold  to 
Bowler  and  Thomas  D.  Carneal,  also  before  the  sale.  The  rate 
to  Carneal  was  fifty  cents  on  the  dollar,  and  to  Bowler  about  the 
same.  The  sale  to  Carneal  he  supposed  to  be  really  for  Bowler, 
as  he  produced  an  order,  and  paid  for  them. 

RICHARD  W.  KEYS. — Was  the  owner  of  between  $50,000  and 
$60,000  of  the  third  mortgage  bonds,  which  he  bought  from 
Walker  at  about  seventy-five  cents  on  the  dollar,  and  paid  for 
in  real  estate.  During  the  troubles  of  the  road,  visited  the  of- 
fice of  the  company  in  Covington  to  get  information  concerning 
the  road,  and  had  interviews  with  Messrs.  Bowler,  Levis,  and 
Withers.  Could  get  no  satisfactory  information  from  the  two 
former,  outside  of  the  "  $800,000  proposition."  Was  not  will- 
ing to  agree  to  this  ;  but,  with  other  bondholders,  was  willing 
to  aid  the  road.  The  information  he  got  from  Mr.  Withers  is 
thus  given : 

"About  that  time,  Mr.  Withers  called  at  my  office  one  day.  He  stated  that 
this  proposition,  of  $800,000,  of  the  directors  was  totally  unwarranted  by  the 
condition  of  the  company.  He  also  stated  that  there  was  sufficient  wood,  sur- 
plus wood,  along  the  line  of  the  road,  that  could  be  brought  to  market  and  sold, 
if  the  directors  would  permit,  to  pay  the  interest  on  the  bonds,  then  due,  or 
about  to  become  due,  I  do  n't  remember  which.  He  also  stated  that  money  hud 
been  expended  in  anticipating  payments  on  real  estate,  and  he  thought  the 
whole  object  was  to  make  as  bad  a  showing  as  possible  of  the  affairs  of  the  road." 

Mr.  Withers  also  told  witness  "  that  the  road  was  in  fair 
condition,  and  that  it  could  be  improved  gradually,  till  it  could 
be  brought  up  to  a  first-class  road,  by  the  expenditure  of  a  part 
of  the  net  earnings  upon  it." 

The  witness  gave  this  account  of  his  interviews  with  Mr. 
Bowler : 

"  I  had  several  interviews  with  Mr.  Bowler,  at  his  store  on  Pearl  Street,  by  his 
own  appointment.  The  first  interview  I  had  with  Mr.  Bowler,  he  asked  me  if  I 
would  exchange  my  bonds  for  his  property  on  Pearl  Street,  and  led  me  to  believe 
that  we  could  make  a  satisfactory  exchange;  but  in  subsequent  interviews  he 
laid  me  that  the  bonds  were  worthless,  and  would  not  buy  them.  That  is  about 
the  sum  and  substance  of  our  negotiations.  These  interviews  took  place  a  short 
time  prior  to  the  decree  of  court." 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  519 

The  witness  further  stated  that  Bowler's  words  to  him  were, 
"  Your  bonds  are  perfectly  worthless;"  and  that  this  terminated 
negotiations.  "It  was  the  fear  of  being  sold  out,  and  losing 
every  thing  I  had  in  the  road,  that  induced  me  to  sell ;  and 
this  was  the  only  reason  that  induced  me  to  sell."  Witness  ac- 
cordingly sold  his  bonds  to  A.  L.  Howry  at  thirty-seven  and  a 
half  cents  on  the  dollar,  flat,  or,  in  other  words,  with  the  interest 
thrown  in. 

SAMUEL  B.  KEYS. — Had  a  small  interest  in  his  brother 
Richard's  bonds,  and  made  efforts  similar  to  his,  to  procure  in- 
formation touching  the  affairs  of  the  road.  He  had  interviews 
with  Bowler,  Levis,  and  Withers,  with  the  same  results  as  those 
already  given.  This  witness  says  : 

"My  interviews  with  Mr.  Bowler  and  Mr.  Levis,  especially  with  Mr.  Bowler, 
were  for  the  purpose  of  getting  them  to  indicate  some  course  of  action  which 
would  suit  them,  and  in  which,  the  bondholders  and  stockholders  could  unite,  for 
furnishing  the  money  necessary  to  pay  the  interest  on  the  bonds.  In  each  one 
of  these  latter  interviews  I  was  met  squarely  by  Mr.  Bowler,  as  also  by  Mr. 
Levis — that  the  road  was  in  such  a  bad  condition  that  it  was  doubtful  if  it  then 
could  be  operated  safely,  and  that  it  was  useless  to  do  any  thing  more  than  to 
have  the  road  sold.  The  result  of  all  was,  that  being  entirely  discouraged,  I 
advised  my  brother  to  sell  his  securities  for  whatever  he  could  get  for  them." 

The  witness  further  stated,  that  he  did  "make  to  Mr.  Bowler 
and  to  Mr.  Levis,  separately  and  t6gether,  various  propositions 
for  the  raising  of  money  for  the  use  of  the  company  in  the  pay- 
ment of  interest,  and  for  the  funding  of  a  portion  of  the  interest 
on  the  third  mortgage  bonds." 

Gr.  W.  C.  JOHNSON. — Was  a  wood-dealer  in  Cincinnati  in 
1858  and  1859.  The  supply  of  wood  at  that  time  came  mostly 
from  the  Ohio  and  Licking  Rivers,  and  it  was  worth,  at  the 
river,  in  Cincinnati  or  Covington,  about  $4  per  cord,  and  deliv- 
ered, from  $5  to  $5.50  per  cord  (a). 

PETER  L.  BROWN. — Was  formerly  of  the  firm  of  Joseph  C. 
Butler  &  Co.,  in  the  wholesale  grocery  business  in  Cincinnati,  in 
the  years  1858,  1859,  and  1860.  During  that  time,  owned 

(a)  A  note  to  the  table  of  "  Transportation  Receipts  and  Expenditures  for  the 
year  ending  October  SI,  1858,"  in  the  Annual  Report,  says:  "There  should  be  de- 
ducted from  operating  expenses  the  cost  of  six  thousand  cords  of  wood,  charged 
in  the  above  wood  account,  being  that  much  more  paid  for  than  was  used — 
$12,000. 


520  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

twenty-nine  third  mortgage  bonds  of  the  road,  of  which  $8,000 
was  bought  of  William  Ernst  by  an  exchange  of  property  in 
Covington  at  about  seventy -five  cents  on  the  dollar,  and  the 
balance  were  purchased  of  Samuel  J.  Walker  at  about  fifty-five 
cents  on  the  dollar.  Had  frequent  conversations  with  Mr.  Bowler 
in  regard  to  their  value.  He  exhibited  to  witness  a  paper  show- 
ing the  amount  of  the  first  and  second  mortgage  bonds,  and  the 
interest  due  and  unpaid  on  these  bonds,  "by  which  he  proved 
that  if  the  road  brought  SI, 750,000 — all  he  said  it  would  bring — 
it  would  have  been  less  than  twenty-five  per  cent  on  the  dollar 
for  the  third  mortgage  bonds  in  which  I  was  interested."  "  The 
statements  which  Mr.  Bowler  made  induced  me  to  sell  my  bonds, 
believing  that  we  might  be  possibly  cut  out  altogether."  This 
sale,  witness  thought,  was  in  April,  1859,  and  yielded  witness 
less  than  thirty  cents  on  the  dollar. 

"  Some  two  or  three  days  subsequent  to  the  sale  of  the  road,  while  on  my 
way  home  to  Clifton,  Mr.  Bowler  overtook  me  on  Vine-street  Hill,  and  invited 
me  to  take  a  seat  in  his  buggy.  Immediately  on  taking  my  seat,  Mr.  Bowler 
commenced  a  conversation  in  relation  to  his  recent  purchase  of  the  Covington 
and  Lexington  Railroad.  He  exclaimed,  in  high  glee,  or  in  very  good  humor: 
'Brown,  you  were  right!'  To  which  I  replied,  by  asking  him  what  he  meant? 
To  which  he  replied,  'In  relation  to  the  value  of  the  road."  Said  he,  'Do  n't  you 
recollect  that  you  always  contended  that  the  road  was  worth  from  two  to  two 
millions  and  a  half  dollars  ?'  I  expressed  surprise,  and  asked  him  '  how  he  came 
to  contend  that  the  road  was  worth  $1,750,000,  when  he,  at  the  same  time,  believed 
it  was  worth  $2,500,000?'  To  which  he  replied,  that  he  had  his  own  interest  to  take 
care  of.  And  in  the  same  conversation  stated,  that  he  had  authorized  Mr.  Gedge 
to  bid  up  to  $2,500,000  for  the  road." 

On  cross-examination,  the  question  was  asked  Mr.  Brown  if 
he  knew  the  directors  of  the  road,  other  than  Bowler,  at  the 
time  he  sold  his  bonds;  and  if  so,  what  were  their  reputations 
for  business  capacity  and  integrity  ?  Witness  had  known  Will- 
iam H.  Gedge  and  Levis  for  years,  and  their  reputations  as 
business  men  and  men  of  integrity  were  good  until  they  became 
associated  with  Mr.  Bowler  in  the  railroad ;  after  which  time,  in 
witness's  opinion,  they  submitted  themselves  to  the  improper 
influences  of  Mr.  Bowler.  Had  been  on  good  terms  with  him 
up  to  the  time  of  the  conversation  in  the  buggy,  which  conver- 
sation terminated  all  intercourse.  "  That  convinced  me  that  he 
had  played  a  deep  and  dishonest  game." 

A.  L.  MOWRY,  manufacturer  and  banker. — He  explained 
that  his  deposition  was  taken,  August  24,  I860,  in  the  litigation 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  521 

between  Bowler  and  Vallette,  concerning  the  priority  of  their 
respective  bonds.  Having  a  copy  of  that  deposition  in  his  pos- 
session, and  the  questions  put  to  him  being  mostly  the  same  as 
those  asked  him  in  1860,  he  adopted  the  answers  given  in  his 
former  deposition  as  his  answers  in  this  case.  The  witness  said : 
"I  bought  thirty-seven  of  third  mortgage  bonds  of  the  Covington  and  Lex- 
ington Railroad  from  Samuel  B.  Keys.  .  .  .  Mr.  Bowler  called  on  me  some 
time  after  the  purchase,  and  told  me  that  he  had  heard  that  I  had  purchased  some 
third  mortgage  bonds  of  the  Covington  and  Lexington  Railroad.  He  said  that 
he  had  come  to  inform  me  that  I  had  made  an  unprofitable  purchase.  He  went 
on  to  state  his  reason — giving  as  his  reason  that  the  road  would  have  to  be  sold, 
and  sold  for  cash,  under  the  second  mortgage  bonds.  He  stated  that  the  third 
mortgage  bondholders  would  have  to  raise  the  money  for  the  road,  and  pay  up 
the  whole  second  mortgage.  In  the  conversation  he  stated,  that  had  he  known 
that  I  wished  to  purchase  bonds,  that  he  would  have  sold  me  his  bonds  for  a  less 
price." 

Mr.  Mowry  verified  the  following  CONTRACT  BETWEEN  BOW- 
LER, VALLETTE,  AND  MOWRY,  to  buy  the  road: 

"  Whereas,  a  suit  is  now  pending  in  the  Circuit  Court  of  Fayette  County,  Ken- 
tucky, in  the  name  of  James  Winslow,  against  the  Covington  and  Lexington 
Railroad  Company  and  others,  the  object  of  which  is  to  sell  the  said  road  and 
all  its  rights  and  franchises  for  the  payment  of  debts  secured  by  mortgages,  and 
also  to  declare  and  ascertain,  in  view  of  such  sale,  the  several  liens  upon  the 
property  of  said  company,  and  their  respective  priorities;  now,  the  parties  hereto, 
in  view  of  such  sale,  and  for  the  purpose  of  protecting  and  securing  their  re- 
spective rights,  and  of  compromising  and  preventing  any  conflict  as  to  their  said 
interests,  and  to  avoid  the  necessity  for  a  continuance  of  litigation  after  the  decree  or 
order  of  said  Court,  upon  appeal  or  otherwise,  do  agree  and  mutually  bind  themselves, 
that  in  the  event  they  or  either  of  them,  or  any  one  in  behalf  of  them,  shall  pur- 
chase said  road,  its  rights  and  franchises,  at  any  sale  or  disposition  thereof, 
which  may  be  had  or  made  under  the  order  or  decree  of  the  said  Court,  such 
purchase  shall  be  made  and  such  property  shall  be  held,  and  any  price  to  be  paid, 
and  any  costs,  charges,  or  expenses,  shall  be  contributed  and  borne  for  the  ben- 
efit of  and  by  the  said  parties  in  the  manner  and  proportion  and  upon  the  condi- 
tions following: 

"  R.  B.  Bowler  holds  certain  securities  of  the  said  company,  known  as  its  third 
mortgage  bonds,  to  the  amount  of  three  hundred  and  sixty-seven  bonds  of  $1,000 
each,  and  certain  other  securities  known  as  income  bonds,  to  the  amount  in  the 
aggregate — the  bonds  being  some  for  $500  each,  and  some  for  $1,000  each — of 
$369,000.  Henry  Vallette  holds  of  the  said  third  mortgage  bonds  one  hundred 
and  thirty-three  bonds  of  $1,000  each ;  and  A.  L.  Mowry  holds  of  the  same  bonds 
eighty-one  bonds  of  $1,000  each.  To  ascertain  the  extent  and  amount  of  interest 
and  benefit  of  the  said  parties,  and  their  proportion  and  share  of  contribution, 
in  the  said  property  and  purchase,  the  third  mortgage  bonds  shall  be  estimated 
and  rated  at  $1,000  for  each  bond,  and  the  said  income  bonds  at  the  sum  of  $166,- 
050  for  the  whole,  or  in  that  proportion;  and  the  said  R.  B.  Bowler  shall  be  in- 
terested, and  shall  contribute  in  and  to  the  amount  of  his  third  mortgage  and 
income  bonds  so  estimated  and  rated,  and  the  said  Henry  Vallette  and  A.  L. 


522  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

Mowry  shall  be  interested,  and  shall  contribute  in  and  to  the  amount  of  their 
third  mortgage  bonds  so  estimated  and  rated;  and,  if  all  or  either  of  the  said 
parties  shall  at  any  time,  in  view  of  such  sale  and  the  protection  of  their  interest, 
purchase  other  of  the  said  bonds,  whether  third  mortgage  or  income,  than  those 
now  held,  the  same  shall  be  considered  as  purchased  on  joint  account,  to  be  held 
and  the  purchase-money  for  them  contributed  by  the  parties  in  equal  proportions. 
The  said  parties  mutually  bind  themselves,  that  they  will  make  no  disposition  of 
the  bonds  now  by  them  respectively  held,  so  as  to  enable  any  person  or  persons 
claiming  the  same  to  defeat  the  object  and  intent  of  this  agreement,  and  only  to 
a  person  or  persons  to  be  substituted  and  agreeing  to  be  substituted  to  a  proper 
proportion,  not  less  in  amount  than  $1,000  of  the  interest  of  one  of  the  parties 
hereto;  and  in  the  event  of  the  purchase  of  the  said  property  under  this  agree- 
ment, evidence  of  the  interest  and  share  of  the  respective  parties  shall  be  so 
made  and  framed,  that  a  certificate  may  be  given  to  any  person  or  persons  to 
whom  nn  interest  shall  have  been  or  may  be  transferred,  showing  the  extent  and 
proportion  of  such  interest.  It  is  also  agreed  that  neither  pailty  shall  make  any 
pui'chase  of  other  of  said  bonds  than  those  now  held,  except  with  the  consent  of 
the  other  parties. 

"Signed  by  the  said  parties,  this  9th  day  of  August,  1859. 

"R.  B.  BOWLER,  HENRY  VALLETTE,  A.  L.  MOWRY." 

On  being  questioned  concerning  the  history  of  the  contract, 
and  what  became  of  it,  Mr.  Mowry  proceeded: 

^  "Soon  after  the  contract  was  signed,  Mr.  Bowler  commenced  talking  to  me 
in  regard  to  our  being  associated  with  Mr.  Vallette  in  the  contract.  He  said  it 
was  utterly  impossible  for  us  ever  to  work  together,  and  represented  to  me  that 
he  was  very  anxious  to  sell  out  his  securities  rather  than  carry  out  the  contract 
according  to  his  agreement.  I  told  him  that  I  was  satisfied  that  the  agreement 
could  be  carried  out  between  us  three  if  we  would  only  live  up  to  it,  and  it  would 
make  a  profitable  investment.  But,  inasmuch  as  he  was  a  director  of  the  road, 
and  had  been  for  a  long  time,  I  should  be  governed,  in  part,  by  what  he  said  in 
regard  to  the  value  of  the  securities.  Mr.  Bowler  came  to  see  me  soon  after  I 
had  this  conversation  with  him,  and  told  me  that  there  was  a  gentleman  in  the 
city  who  represented  a  party  in  Kentucky,  that  wished  to  buy  all  our  securities; 
that  was,  his,  mine,  and  Vallette's,  if  we  would  sell  them.  I  asked  him  who  the 
party  was?  He  told  inc  it  was  Thomas  Carneal,  from  Frankfort.  He  said  that  he 
had  made  up  his  mind  that  there  was  no  use  for  us  to  try  to  work  together  with 
Vallette.  He  therefore  made  up  his  mind  to  sell  his  securities,  nnd  advised  mo 
to  do  the  same.  He  requested  me  to  go  clown  to  the  Spencer  House  with  him, 
and  he  would  introduce  me  to  Carneal.  I  went  down  to  the  Spencer  House,  saw 
Carneal,  and  had  a  conversation  with  him  in  regard  to  the  sale  of  my  securities. 
I  told  Mr.  Bowler,  at  the  time,  that  I  should  be  governed  entirely  by  his  action  in 
regard  to  the  matter,  and  we  made  a  proposition  to  Mr.  Carnenl  to  sell  out  our 
bonds  at  fifty  cents  on  the  dollar,  giving  him  until  the  last  day  of  September  or 
first  day  of  October  to  accept  our  proposition.  Mr.  Carneal  accepted  our  propo- 
sition at  the  time  agreed  upon,  and  I  took  my  bonds — all  that  I  owned  at  that 
time — to  Judge  Gholson's  office,  to  deliver  them  according  to  agreement.  I  took 
only  seventy-seven  bonds  at  that  time.  Mr.  Bowler  objected  to  the  delivery  of 
said  bonds  to  Mr.  Carneal,  giving  as  his  reason  that  it  was  not  all  the  bonds  that 
I  previously  had  represented  that  I  owned.  I  told  Mr.  Bowler  that  that  was  all 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  523 

the  bonds  that  I  could  dispose  of,  as  I  had  simply  represented  four  bonds  that 
belonged  to  Mr.  Gaff.  Mr.  Bowler  said  he  would  have  nothing  to  do  with  it, 
unless  I  should  deliver  the  whole  eighty-one  bonds,  which  I  refused  to  do  at  that 
time ;  but  subsequently  I  took  a  part  of  other  bonds  and  delivered  the  eighty-one." 
.  .  .  "The  only  reason  that  induced  me  to  sell  out,  was  the  management  of 
Mr.  Bowler,  as  I  had  no  difficulty  with  Mr.  Vallette,  and  did  not  anticipate  any." , 
..."  Mr.  Bowler  told  me  that  he  (Mr.  Carneal)  did  n't  wish  to  buy  Vallette's 
bonds  at  that  time,  as,  if  he  bought  his  (Bowler's)  bonds  and  my  bonds,  Vallette 
would  have  to  sell  his  at  any  price  he  had  a  mind  to  give  him." 

"  After  Mr.  Bowler  and  I  had  contracted  to  sell  our  bonds  to  Mr.  Carneal,  he 
came  to  me  and  said  Mr.  Carneal  was  going  to  make  Mr.  Butler  an  offer  for  his 
bonds;  that  Mr.  Butler  had  proposed  to  sell  out  at  the  same  price  I  was  to  have 
for  mine.  He  (Bowler)  wanted  I  should  sign  a  paper  certifying  that  the  price  he 
and  I  were  to  have  for  our  bonds  was  forty-five  cents  on  the  dollar,  flat,  at  six, 
twelve,  and  eighteen  months,  with  all  the  coupons  past  due  thrown  in.  I  told  Mr. 
Bowler  I  should  sign  no  such  paper;  that  if  Mr.  Butler  asked  me,  I  should  tell 
him  the  facts,  which  was,  that  I  was  to  sell  my  bonds  at  fifty  cents  on  the  dollar 
[flat]  at  six,  twelve,  and  eighteen  months,  with  interest  at  six  per  cent." 

On  cross-examination,  Mr.  Mowry  said  Mr.  Bowler  repre- 
sented that  he  was  selling  "out  to  Carneal.  I  afterward  ascer- 
tained that  he  was  not  selling  out  ;'7  and  on  re-examination, 
further  said : 

"Mr.  Bowler  and  myself  made  an  agreement  to  sell  all  the  bonds  we  owned 
to  Thomas  D.  Carneal,  and  appointed  a  day  to  make  the  delivery  to  Mr.  Carneal. 
I  went  to  Judge  Gholson's  office  to  deliver  according  to  agreement.  Then  I  as- 
certained from  conversation  between  Bowler,  Carneal,  and  myself,  that  Bowler 
was  not  acting  in  good  faith  toward  me,  and  was  really  the  purchaser  of  my 
bonds,  through  Cavneal,  instead  of  selling  his  bonds  to  Carneal,  as  he  had  pre- 
viously agreed  with  me  to  do." 

HENRY  VALLETTE. — In  1859,  owned  some  $50,000  of  the 
second,  and  $129,000  of  the  third  mortgage  bonds  of  the  road; 
and  was  a  defendant  in  the  foreclosure  suit.  The  "  Proposition 
to  Bondholders  "  destroyed  confidence  in  the  directory  on  the  part 
of  the  bondholders.  "  The  affairs  of  the  company,  after  this 
proposition  was  made  to  the  bondholders,  seemed  to  be  managed 
by  Bowler  and  President  Levis.  The  bondholders  believed  that 
Bowler  was  to  pay  the  debt  of  the  company  on  which  the  di- 
rectors were  liable  as  indorsers,  and  that  Bowler  was  to  have 
no  opposition  from  them  in  buying  the  road." 

"Bowler  said,  they  determined,  of  themselves,  to  take  the  revenues  of  the 
company  and  apply  them  to  relieving  the  directors  of  their  liabilities.  But  public 
indignation  was  excited  by  the  publication  of  this  proposition  to  the  bondholders. 
It  degraded  the  bonds,  and  enabled  Bowler  to  buy  a  large  amount  of  them  at  very 
low  prices.  Bowler  held  many  third  mortgage  and  some  income  bonds,  which  he 
had  bought  at  high  rates,  before  the  railroad  company  suspended  the  payment  of 


524  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

interest  on  their  bonds;  but  after  the  publication  of  this  proposition,  he  bought  a 
great  many  second  mortgage  bonds  for  fifty-five  cents,  third  mortgage  for  thirty- 
five  cents,  and  income  bonds  for  ten  to  fifteen  cents  on  the  dollar,  which  was  the 
general  market  price  for  these  bonds  from  the  time  they  were  degraded  by  the 
publication  of  the  circular  or  proposition  referred  to,  until  the  decree  was  made 
for  the  sale  of  the  railroad. 

"For  many  months  before  the  trial  of  the  case,  it  was  apparent  to  me,  and  I 
think  to  all  interested  in  the  result  of  the  trial,  that  the  defense  of  the  company 
was  simulated  and  affected,  and  not  an  earnest  defense.  I  think  this  was  public 
sentiment  at  the  time  in  Kentucky.  I  took  an  active  part  in  defending  the  third 
mortgage  bonds,  and  in  trying  to  get  a  Receiver  appointed  to  save  the  road  for 
a  while,  before  a  sale  was  ordered." 

Witness  explained  that  he  paid  his  attorney  for  services  in 
the  case  a  total  of  $3,800.  "I  acted  in  the  trial  against  the 
second  mortgage  bonds.  The  holders  of  them  wanted  a  sale  of 
the  road.  I  opposed  at  that  time."  "Bowler  always  talked 
down  the  bonds  of  all  kinds,  during  the  pendency  of  the  suit, 
and  was  not  particular  what  he  said  of  them."  The  holders  of 
third  mortgage  bonds  were  persons  of  means.  "  Bowler's  di- 
plomacy was  always  to  make  the  appearance  of  wishing  some 
reasonable  arrangement  to  relieve  the  company ;  but  it  was  evi- 
dent he  really  wanted  a  sale  of  the  road,  and  intended  to  buy 
it.  That  was  believed  by  the  bondholders  generally." 

Being  questioned  as  to  an  application  made  by  him  for  the 
continuance  of  the  foreclosure  case  at  the  June  term  of  the 
court,  Mr.  Vallette  said  he  had  made  and  filed  an  affidavit  for 
that  purpose,  dated  the  22d  of  June,  1859,  and  gave  this 
explanation  of  the  circumstances  attending  the  same : 

"Mr.  Bowler  had  told  me  some  time  before  that  he  was  not  going  to  defend 
the  priority  of  the  income  bonds  over  the  third  mortgage  bonds,  as  he  held  more 
of  them  than  the  incomes,  and  that  Mr.  Hunt,  who  was  the  reputed  attorney  of 
the  railroad  company,  would  defend  the  third  mortgage  bonds.  Mr.  Bowler  also 
said  that  the  case  would  not  be  tried  at  the  June  term,  as  none  of  the  parties 
were  ready.  I  relied  on  these  statements  of  Mr.  Bowler,  until  about  a  month 
before  the  sitting  of  the  court,  when  I  began  to  see  they  would  bring  on  a  trial, 
if  they  could,  and  called  on  Mr.  Smith,  who  was  the  agent  for  the  second  mort- 
gage bondholders,  and  got  his  promise  that  we  should  not  be  forced  into  a  trial, 
unless  we  were  ready.  My  attorney,  Mr.  Buckner,  did  not  feel  competent  to  de- 
fend the  case  alone,  and  I,  with  Mr.  Walker,  who  held  some  third  mortgage  bonds 
at  that  time,  had  employed  Governor  Morehead  to  assist  Mr.  Buckner.  On  the 
day  of  trial,  Bowler  tried  to  bring  on  the  case,  and  Smith  assisted  him,  and  denied 
what  he  had  agreed  to  do  for  us  in  that  behalf.  Governor  Morehead  was  not  pres- 
ent, as  we  none  of  us  expected  a  trial  to  come  on;  and  1  made  the  aforesaid 
affidavit,  which  induced  the  court  to  continue  the  case." 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  525 

Mr.  Bowler  made  a  counter-affidavit,  which  was  sworn  to  by 
him  on  the  same  day,  and  filed  in  the  cause,  opposing  a  contin- 
uance. The  witness  identified  a  copy  of  it,  and  the  closing  part 
of  it  is  as  follows  : 

"  That  so  far  from  said  Vallette  being  unprepared  to  defend  the  third  mort- 
gage when  this  affiant  informed  him  that  he  would  go  for  a  sale  of  the  road,  the 
said  Vallette  had  already  employed  Judge  Buckner  as  his  attorney.  The  conver- 
sation occurred  in  this  way,  namely :  He  told  affiant  that  he  had  been  to  Lexing- 
ton, had  employed  Judge  Buckner,  and  would  apply  for  a  Receiver.  Whereupon 
affiant  replied,  that  if  that  was  the  case,  rather  than  the  road  should  go  into  the 
hands  of  a  receiver,  he  (affiant),  as  a  holder  of  third  mortgage  bonds,  would  unite 
with  the  second,  and  go  in  for  a  sale  of  the  road.  R.  B.  BOWLER." 

In  regard  to  his  contract  with  Bowler  and  Mowry  to  buy 
the  road,  Mr.  Vallette  said :  "  After  the  case  had  been  argued, 
I  thought  the  court  would  order  a  sale,  and  entered  into  an 
agreement  with  R.  B.  Bowler  and  A.  L.  Mowry,  by  which  I 
consented  to  a  sale  of  the  road  being  made."  "I  went  into  the 
agreement,  supposing  a  decree  to  sell  the  road  would  be  made 
(as  my  attorney  told  me  he  had  no  doubt  that  the  court  would  or- 
der a  sale),  as  a  matter  of  self-preservation."  Difficulties  arose, 
and  the  agreement  was  abandoned  after  the  decree  for  sale. 

"  Judge  Gholson  was  the  principal  attorney  of  Mr.  Bowler. 
Mr.  Hunt,  though  nominally  the  attorney  of  the  railroad  com- 
pany, was,  to  all  appearances,  Bowler's  attorney.''  "  The  drift 
of  Gholson's  argument  was  to  sustain  the  incomes  as  prior  to  the 
third  mortgage  bonds." 

Mr.  Vallette  was  shown  an  estimate  made  by  him  years  be- 
fore, of  the  cost  of  Bowler's  investments  in  the  road;  but  he 
did  not  attach  any  importance  to  the  paper.  It  showed  them  to 
amount  to  $330,250. 

Cross-examination. — "I  did  join  in  the  desire  to  Winslow  to  institute  said 
suit,  on  the  part  of  the  second  mortgage  bondholders;  but  at  that  time  we  only 
proposed  to  ask  the  court  for  a  Receiver.  It  was  after  the  suit  commenced  that 
the  pleadings  were  amended,  and  the  trustee  went  in  for  sale,  which  I  opposed, 
though  I  thought  a  sale  of  the  road  was  necessary,  as  it  owed  more  than  it  was 
worth ;  but  I  did  not  want  a  sale  until  an  opportunity  could  be  given  to  the 
holders  of  the  different  classes  of  securities  to  ascertain  their  equities,  and  time 
had  been  given  to  compromise  among  themselves,  which  could  be  best  done  after 
the  road  had  been  managed  by  a  Receiver  a  year  or  so,  and  the  capacity  of  the 
road  to  earn  money  had  been  demonstrated." 

Mr.  Vallette  testified  to  the  early  efforts  of  the  directors  in 
behalf  of  the  road,  and  also  to  the  want  of  interest  taken  to 


526  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

preserve  the  road  by  the  counties  and  cities  interested.  "  The 
only  interest  I  ever  saw  the  counties  take  in  preventing  a  sale 
of  the  road,  was  on  the  day  of  trial.  There  came  a  party  from 
Harrison  County,  and  applied  to  be  made  parties  to  the  suit 
(which  the  court  allowed),  when  they  made  a  very  weak 
argument,  showing  that  they  did  not  understand  the  case,  and 
were  of  no  use  in  preventing  the  sale  ordered  by  the  court." 
When  witness  purchased  his  third  mortgage  bonds  from  Walker, 
railroad  securities  were  depressed,  and  money  scarce.  Western 
railroad  securities  were  in  bad  credit.  "Mr.  Walker  frequently 
applied  to  me  to  indorse  for  the  company,  and  offered  to  pay 
me  liberally  for  doing  so,  but  I  refused.  He  applied  to  Bowler, 
and  paid  him  liberally  for  indorsing  for  the  company,  as  Bowler 
told  me  himself." 

Being  asked  what  was  said  by  Judge  Robinsorr,  his  attorney, 
in  his  argument  on  the  trial,  as  to  Bowler's  course,  and  his  in- 
tention of  purchasing  the  road,  the  witness  said  he  could  not 
give  the  exact  words.  In  reference  to  the  "Proposition  to 
Bondholders,"  the  judge  said  tl  that  it  evidently  was  not  made 
in  good  faith  by  the  company,  and  was  brought  about  by  Bowler 
to  degrade  the  bonds  and  enable  him  to  buy  them  up  for  a  trifle, 
which  he  had  done  ;  and  was  now  in  this  court  in  possession  of 
such  large  amounts  of  bonds,  as  in  the  event  of  the  sale  being 
decreed  by  the  court,  he  would  become  the  purchaser;  thus,  as 
a  trustee,  suing  the  interest  he  should  protect,  and  asking  the 
court  to  legalize  a  stupendous  fraud." 

JOHN  H.  CHEVER. — Of  the  firm  of  Kirk  &  Chever,  stock- 
brokers, in  Cincinnati,  testified  that  his  firm  bought  large 
amounts  of  bonds  of  the  road  for  Mr.  Bowler,  during  the  years 
1858,  1859,  and  1860.  He  furnished  a  tabular  statement  from 
their  books,  which  is  printed  on  pages  179,  180,  and  181  of  the 
printed  record.  Disregarding  small  amounts,  the  following  are 
the  prices  paid : 

In  October,  1858,  $3,000  3d  inert,  at  33  J  cents  on  the  dollar.  In  November, 
$6,000  at  80c.  In  December,  $500  income,  10c.  flat.  In  January,  1859,  $2,000 
2d  mort.  50c.;  in  March,  $4,000  3d  mort.  25c.  flat;  $9,280  2d  mort.  45c. ;  $7,000 
at  45c.  flat.  In  May,  $5,000  2d  mort.  at  50c.  In  June,  $36,000  income,  at  12  jc. 
In  July,  $2,500  income,  at  12Jc.  In  August,  $4,000  3d  mort,  at  36c.  In  Octo- 
ber, $1,000  2d  mort.  at  75c.,  and  $1,000  at  70c..  $2,000  at  66c.,  several  coupons  at 
par ;  and  $1,000  at  COc.  In  November,  $1,000  2d  mort.  at  65c.  In  December, 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  527 

$10,000  preferred  10  per  cent  income,  35c.  In  January,  1860,  $9,000  2d  mort.  at 
65c. ;  $2,000  1st  mort.  at  75c.  In  February,  $5,000  income  10  per  cents,  at  24c.; 
$1,000  2d  mort.  at  66c.  flat;  $1,000  at  80c.,  and  some  coupons  at  par.  In  March, 
$4,000  10  per  cent  income.  40c.  flat;  $1,000  2d  mort.  at  80Jc.  In  May,  $18,500 
income,  at  15c.  In  June,  $5,000  2d  mort.  at  70c.  and  interest.  In  July,  $3,000 
2d  mort.  at  73c.,  and  $1,000  at  70}c.  In  July,  $2,000  1st  mort.  at  73c.,  and 
$2,000  2d  mort.  at  70c.  and  interest,  besides  coupons  during  the  last  few  months 
at  par. 

SAMUEL  J.  WALKER. — Treasurer  of  the  company  until  the 
latter  part  of  1857,  as  also  agent  for  the  sale  of  the  bonds  of 
the  company.  James  W.  Walker  is  brother  of  witness.  "I 
purchased  the  third  mortgage  bonds  on  his  account."  Gave 
mortgage  security  on  real  estate  to  an  estimated  value  of  $150,- 
000,  and  the  bonds  remained  on  trust,  and  were  disposed  of  only 
as  the  liabilities  were  discharged.  After  this  assumption,  there 
was  a  balance  of  $40,000  or  $50,000,  on  which  the  directors 
were  liable,  which  "was  afterward  paid  by  the  sale  of  income 
bonds.''  This  balance  was  paid  soon  after  the  assumption.  The 
payments  under  the  assumption  were  generally  made  in  advance 
of  the  times  required  by  the  contract ;  and  all  the  amount  of 
$300,000  was  paid  (a).  The  company  allowed  witness  $15,000 
on  his  account  as  Treasurer;  $26,500  on  his  account  as  bond- 
agent,  and  other  matters ;  $27,000  on  account  of  purchase  of 
the  college  property,  with  release  of  damages;  and  $15,000  on 
third  mortgage  coupons  past  due.  .These  allowances  amounted 
to  $83,500;  and  were  by  witness's  consent,  except  some  $15,000 
to  $18,000,  applied  by  the  company  to  the  payment  of  the  "old 
bank  indebtedness;"  and  he  did  not  recollect  any  other  "old 
bank  indebtedness ''  fpr  which  the  directors  were  liable,  except 
that  assumed  as  aforesaid.  Witness  had  numerous  and  large 
transactions,  both  on  behalf  of  the  company  and  individually, 
with  Mr.  Bowler,  in  selling  him  bonds,  and  procuring  indorse- 

(a)  The  account  of  James  W.  Walker,  as  copied  from  the  books  of  the  com- 
pany by  E.  B.  Clark,  and  sworn  to  by  him,  showed  that  he  was  charged  with  the 
sale  price  of  the  third  mortgage  bonds,  amounting  to  $300,000,  and  other  charges, 
making  a  total  of  $340,726  23.  The  credit  side  of  the  account  showed  that  it 
•was  entirely  paid,  mostly  in  taking  up  "bills  payable,"  scheduled  in  two  ac- 
counts, marked  A  and  B,  the  first  amounting  to  $210,869.69,  and  the  second 
to  $111,000.  The  latter1  amount  is  shown  to  have  been  bills  payable  of  the  char- 
acter usually  called  in  this  suit  "old  bank  indebtedness,"  and  to  have  all  been, 
paid  previous  to  July  16. 1858;  and  the  last  credit  on  the  account  is  of  $3,399.92, 
on  the  16th  day  of  June,  1859 — being  the  only  one  during  that  year.  * 


528  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

ments  by  the  house  of  Carney,  Swift  &  Co.,  in  which  he  was  a 
partner.  After  Mr.  Bowler  became  a  director  of  the  road,  wit- 
ness agreed  to  sell  through  him,  "he  acting  as  agent,  $50,000 
third  mortgages,  which  sale  I  authorized  him  to  make  at  forty- 
five  cents  on  the  dollar,  and  which  he  professed  to  have  made  to 
a  party  in  New  York  at  forty  cents  on  the  dollar  on  some  time." 
On  this  arrangement  some  $39,000  of  bonds  were  delivered ; 
but  the  price  being  very  low,  and  circumstances  inducing  the 
witness  to  believe  that  the  alleged  sale  was  really  to  Bowler 
himself,  he  investigated  the  matter,  and  finding  such  to  be  the 
fact,  declined  to  deliver  any  more  bonds.  Witness  explained,  that 
in  the  argument  in  the  foreclosure  suit,  his  "  attorney  claimed, 
or  took  the  ground  before  the  court,  in  the  contention  for  prior- 
ity between  the  income  and  third  mortgage  bonds,  that  if  the 
court  should  decide  that  the  income  bonds  should  take  preced- 
ence of  the  third  mortgage  bonds,  on  account  of  my  knowledge 
of  the  issue  of  the  income  bonds,  at  the  time  of  my  purchase 
of  the  third  mortgages,  that  then,  inasmuch  as  I  had  taken  the 
third  mortgages  instead  of  or  for  a  prior  mortgage  on  the  road, 
given  previous  to  the  issue  of  any  of  the  income  bonds,  that  my 
claim  should  be  subrogated,  or  remitted  back,  to  the  original  to 
the  directors  and  myself."  This  brought  about  a  negotiation 
between  Mr.  Bowler  and  witness's  attorney,  for  the  third  mort- 
gage bonds  held  by  him  ($105,000),  for  which,  with  $10,000  or 
$12,000  income  bonds,  also  held  by  witness,  Mr.  Bowler  agreed 
to  pay  about  $54,000.  While  the  foreclosure  suit  was  pending, 
"  and  very  shortly  before  the  decision  thereof,"  Mr.  Bowler  of- 
fered to  sell  to  witness  "some  $300,000  of  the  third  mortgage 
bonds,  or  thereabouts,  at  thirty,  thirty-three,  or  thirty-five  cents 
on  the  dollar,  "  at  which  price,  whatever  it  was,  I  agreed  to 
purchase,  and  arranged  as  to  time  to  comply  with  his  terms, 
when  he  declined  to  sell."  The  witness  appended  to  his  depo- 
sition an  estimate  made  by  him  about  the  time  of  the  sale  of 
the  road,  of  the  cost  to  Mr.  Bowler  of  his  investments  in  the 
road,  which  estimate  of  such  cost  was  a  total  of  $483,000.  It 
was  also  shown  by  the  testimony  of  Mr.  Walker,  as  well  as  that 
of  JOSIAH  II.  DODGE,  that  the  company  owned  other  valuable 
real  estate  than  that  used  in  the  operation  of  the  road,  at  the 
time  of  the  sale,  of  which  was  ten  acres  of  the  "  Southgate 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  529 

property."  With  the  fee  of  the  freight-depot  grounds  and 
"round-house"  in  Covington,  and  depots  in  Cynthiana,  Paris, 
and  Lexington,  the  real  estate  amounts  to  many  thousands 
beyond  the  road-bed  proper. 

On  cross-examination,  Mr.  Walker  said  he  supposed  the  im- 
provement by  arching  the  road  through  the  College  grounds, 
which  the  company  was  bound  to  do,  would  have  cost  more  than 
the  company  paid  him  for  a  release  therefrom ;  that  the  income 
bonds  sold  higher  before  the  suspension  of  interest  in  1857,  than 
they  did  afterward ;  and  that  after  Bowlera  becoming  a  director, 
witness  did  not  sell  him  any  bonds  on  behalf  of  the  company. 

WM.  H.  TAYLOR. — Assistant  Assessor  of  the  Sixth  Pistrict 
of  Kentucky,  to  which  the  road  made  its  returns  for  taxation. 
Had  access  to  the  books  of  the  District,  and  from  them  made 
an  Exhibit  of  such  returns,  from  which  it  appeared  that  the 
receipts  of  the  road  for  the  transportation  of  passengers  for  the 
year  1863  (excluding  the  month  of  January),  were  $344,621.17. 
For  the  year  1864,  for  the  transportation  of  passengers  for  six 
months,  and  for  freight  and  passengers  for  six  months,  $615,061. 
For  the  year  1865,  for  transportation  of  freight  and  passengers 
for  eleven  months,  $774,169.  For  the  year  1866,  for  freight 
and  passengers  for  seven  moaths,  and  far  passengers  the  remain- 
ing five  months,  $474,569.  For  the  year  1867,  for  passengers 
only,  $249,597;  and  for  the  year  1868,  for  passengers  only, 
$235,199. 

GEORGE  HOWK. — Testified  that  at  the  time  of  the  sale  of 
the  road,  he  resided  in  Covington,  and  had  an  acquaintance  with 
Mr.  Bowlerr  of  years'  standing,  and  of  such  a  business  and  per- 
sonal character,  that  whenever  they  met  he  had  something  to  say 
to  witness.  At  that  time,  Mr.  Howk  said,  he  had  pecuniary 
means  to  invest  in  such  an  enterprise  as.  he  referred  to  in  this 
part  of  his  deposition  : 

"In  1859  I  was  going  down  Madison  Street,  in  the  city  of  Covington,  Ken- 
tucky, and  on  the  corner  of  Fifth  nnd  Madison  Streets  Mr.  Bowler  hailed  me. 
Through  the  course  of  the  conversation  I  had  with  him,  I  told  him  I  believed  I 
would  take  stock  in  the  company  forming  in  Harrison  County,  Kentucky,  for  the 
purpose  of  purchasing  the  road.  Mr.  Bowler  told  me  to  have  nothing  to  do  with 
it;  that  he  had  just  sold  out  all  of  his  stock  and  bonds  to  Mr.  Carneal;  that  he 
Trould  have  nothing  to  do  with  it.  This  was  the  Monday  of  the  same  week  that 
the  road  was  sold." 

34 


530  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

DR.  GEORGE  H.  PERRIN. — Resides  at  Cynthiana,  and  is  one 
of  the  directors  of  the  road,  and  has  been  since  December, 
1859.  Was  one  of  a  company  formed  in  Harrison  County,  to 
buy  the  road ;  and  on  the  evening  before  the  sale,  went  to  Lex- 
ington to  attend  it.  Met  Mr.  Levis  on  the  trayi,  and  informed 
him  that  he  (witness)  was  going  to  attend  the  sale  as  one  of  the 
company.  ll  Mr.  Levis  commenced  depreciating  the  road,  speak- 
ing of  its  very  bad  condition ;  said  it  would  take  a  very  large 
sum  to  put  it  into  good  running  order.  He  spoke  particularly  of 
the  Townsend  bridge."  "  He  said  it  would  take  a  very  large  sum 
of  money  to  fill  it.  He  said  that  the  purchasers  of  the  road  would 
be  very  much  troubled  about  the  road  from  Paris  to  Lexington, 
Kentucky,  as  that  road  belonged  to  another  company,  and  he  did 
not  know  whether  it  could  be  bought,  rented,  or  leased."  "  He  said 
he  thought  the  road  would  bring  probably  $1,500,000  or  31,600,- 
000.  I  asked  him  if  he  did  not  think  it  would  bring  $1,700,000? 
He  said,  whoever  would  give  that  would  give  too  much,  and 
that  they  would  be  sorry  for  it,  or  words  something  like  that." 
At  the  meeting  of  the  company  that  evening,  to  agree  upon  a 
bidder  and  fix  the  amount  for  which  the  company  would  bid,  in 
consequence  of  the  conversation  with  Mr.  Levis  (and  which  wit- 
ness communicated  to  the  meeting),  he  voted  against  bidding 
$2,000,000  for  the  road.  After  the  sale,  "  I  received  a  letter 
from  Mr.  Bowler,  in  which  he  said  he  wished  to  get  some  influen- 
tial men  along  the  road  to  take  stock  in  the  road,"  and  suggested 
witness  and  Mr.  Shawhan.  "  He  said  I  could  have  as  much 
stock  in  the  road  as  I  wanted,  or  words  to  that  amount.  I  re- 
turned him  no  answer." 

JOSEPH  SHAWHAN,  SR. — Resided  in  Harrison  County,  and 
at  the  time  of  taking  his  deposition,  was  in  the  89th  year  of  his 
age.  Was  a  director  of  the  road,  and  one  of  a  committee  of 
the  Board  appointed  to  call  on  Mr.  Bowler,  and  ascertain  upon 
what  terms  he  would  surrender  the  road  to  the  company.  The 
committee  consisted  of  Messrs.  Shawhan,  Greer,  and  Zinn, 
and  called  upon  Mr.  Bowler  at  his  office  in  Cincinnati,  in  the 
Summer  of  1860,  and  selected  Mr.  Shawhan  to  state  the  busi- 
ness of  the  committee.  "  I  told  him  that  Mr.  Zinn,  Mr.  Greer, 
and  myself  had  been  appointed  to  see  him  about  the  road. 
His  answer  back  to  me  was,  that  he  would  not  have  any  thing 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  531 

to  say  to  Mr.  Zinn  or  Mr.  Greet;  that  any  thing  I  had  to  .say 
to  him,  that  he  would  talk  to  me  about  it ;  that  the  other  gentle- 
men could  withdraw;  that  he  would  have  nothing  to  say  to 
them  ;  and  they  did  leave  forthwith ;  that  I  could  stay  and  have 
some  talk  about  it.  I  did  stay ;  stayed  with  him  the  better 
part  of  the  day,  and  sounded  him  to  know  what  he  would  take. 
To  the  best  of  my  knowledge,  he  said  that  he  would  take  $500,000 
for  his  bargain.  I  declined  giving  him  that,  and  I  did  not  make 
him  any  offer.  When  I  found  that  that  was  the  least  he  would 
take,  I  told  him  that  I  could  not  go  into  it  on  those  terms.  After 
I  declined  his  offer,  he  made  me  propositions  about  the  road ; 
that  I  could  take  as  much  stock  in  the  road  as  I  wanted,  if  I 
wanted  to  join  him."  Witness  was  one  of  the  company  formed 
in  his  county  to  buy  the  road,  and  selected  as  the  bidder.  He 
bid  as  high  as  $2,015,000,  or  thereabout,  when  all  his  company 
had  backed  out  from  any  higher  bid,  as  he  supposed,  from  what 
Dr.  Perrin  had  communicated  to  the  company  the  evening  before. 

ABSTRACT  OF  DEFENDANTS'  EVIDENCE. 

D.  C.  COLLINS. — In  1857  and  1858  was  book-keeper  to  bring 
up  the  books  of  the  company.  He  verified  the  correctness  of 
the  Annual  Reports  for  1857  and  1858,  the  tables  of  which  he 
mostly  prepared  himself  (a).  The  total  amount  of  "  interest,  dis- 
count, commissions,  etc.,  paid  by  the  company  to  November  1, 
1857,"  he  stated  to  be  $1,078,293.97;  and  from  that  time  to 
November  1,  1858,  $111,529  more.  Witness  gave  a  table  of 
the  liabilities  due  and  unprovided  for  November  1,  1858,  as 

follows : 

Coupons  past  due  and  unpaid, $114,140  00 

Bills  payable    "                                                         •  29,634  47 

Due  individuals  for  materials,  unpaid,        ....  2,276  27 

«             "                  wood,               "          ....  4,141  00 

Interest  and  exchange  on  coupons  (estimated),           .         .  5,000  00 

Due  officers  and  laborers,  services,         ....  13,110  67 

$168,302  41 
Less  cash  on  hand,  November  1,  1858 6,176  88 

Liability  of  the  company,  November  1,  1858,  past  due  and 

•wholly  unprovided  for, $162,125  53 

(a)  The  Annual  Report  of  1853,  1855,  1857,  and  1858  were  offered  in  evi- 
dence. As  to  the  Report  for  1859,  see  the  newspaper  report  commencing  on 
page  500. 


532  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

If,  after  that  date,  all  interest  was  left  unprovided  for,  the 
total  coupons  due  on  the  1st  of  August,  1859,  would  amount  to 
$266,230.  "  Due  and  becoming  due,  up  to  December  18, 1859," 
including  all  interest  and  demands  of  every  kind,  and  the  in- 
terest paid  on  the  first  mortgage  bonds,  $465,825.  On  cross- 
examination,  Mr.  Collins  verified  Exhibits  D.  and  Or.  in  the 
Annual  Report  of  1858. 

JOHN  T.  LEVIS  was  recalled  by  the  defendants,  November 
11,  1869. — The  financial  condition  of  the  road  was  not  good 
when  he  became  a  director,  and  he  soon  became  liable  as  in- 
dorser,  etc.  In  1854,  the  money  market  was  close.  There  were 
suits  against  the  company  at  different  times,  and  the  means  of 
the  company  were  attached,  and  its  subscription-books  taken  at 
the  suit  of  creditors,  and  put  into  the  hands  of  a  Receiver.  The 
directors  used  every  effort  to  extricate  the  road  from  its  diffi- 
culties, but  resort  to  individual  credit  was  necessary.  Mr. 
Bowler  was  requested  by  some  stockholders  to  become  a  director, 
"  hoping  his  influence,  wealth,  and  large  interest,  might  help 
the  company  out  of  its  difficulties,  and  be  of  general  use  to  it." 
"  He  was  an  attentive  member  to  the  interest  of  the  company. 
So  far  as  I  knew,  he  devoted  a  good  deal  of  time  to  its  business, 
and  assisted  with  his  name  and  advice  to  protect  its  interest, 
and  economize  its  means."  He  indorsed  for  the  company,  with 
others,  to  the  amount  of  $20,300 ;  but  on  cross-examination, 
Mr.  Lev  is  said  this  was  the  only  liability  that  he  knew  of  his 
on  behalf  of  the  company,  and  that  he  knew  of  no  losses  of  Mr. 
Bowler  by  reason  of  any  obligations  of  his  for  the  company. 
During  Mr.  Levis's  connection  with  the  road,  he  said  there  were 
no  expenditures  made  thereon  except  what  were  absolutely 
necessary,  "and  often  less  than  should  have  been,  on  account 
of  its  poverty."  The  property  purchased  from  Walker  was 
necessary  for  the  business  of  the  company;  and  at  the  time  of 
taking  his  deposition,  was  used  for  various  purposes  of  the  road. 

The  witness,  nor  any  director,  so  far  as  he  knew,  refused,  at 
any  time,  to  give  information  concerning  the  affairs  of  the  road. 
The  Executive  Committee,  consisting  at  the  time  of  Gedge,  Fo- 
ley,  and  Levis,  with  Mr.  Bowler  acting  with  them,  prepared  the 
"$800,000  circular."  Subsequently,  the  witness  said:  "My 
recollection  is,  that  I  wrote  the  proposition  to  the  bondholders, 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  533 

and  that  Bowler  wrote  the  postscript,  after  I  submitted  it  to  the 
committee." 

Witness  attended  the  sale.  There  was  much  bidding.  I 
heard  Mr.  Bowler  say,  "he  did  not  want  to  buy  the  road;  but 
he  must  make  it  bring  enough  to  protect  his  interest  in  the  road, 
or  buy  it."  The  road  did  not  sell  for  enough  to  pay  its  indebt- 
edness ;  and  a  statement  was  given  to  witness  which  showed  its 
indebtedness,  after  the  sale,  exceeded  $1,000,000,  which  he 
made  an  Exhibit  to  his  deposition.  Thomas  D.  Davis  was  in 
charge  of  the  machine-shops  at  the  time  of  the  sale ;  and  left 
the  road  in  consequence  of  witness's  complaints  that  he  was 
found  in  a  condition  unfit  to  attend  to  his  business.  All  the 
money  received  by  the  committee,  tl  Levis,  Casey,  and  Benton, 
Trustees,  was  propei'ly  applied  to  the  payment  of  the  debts  of 
the  company ;  but  I  can  not  now  recollect  all  the  details  of 
payment." 

Cress-examination. — The  witness  being  asked  if,  after  the 
sale,  Mr.  Bowler  proceeded  to  make  the  improvements  mentioned 
in  the  circular,  said :  "  Mr.  Bowler  did  not  proceed  to  make  all 
the  improvements  stated  as  wanted;  but  did  get  more  cars  and 
machinery,  and  proceed  to  put  the  road  in  better  running  con- 
dition." Being  asked  if  the  cars  did  not  still  receive  and  dis- 
charge passengers  in  Washington  Street,  in  Covington,  as  in 
1859,  he  said,  "They  do  so — just  as  they  have  always  done." 
"Improvements  have  been  generally  gradual.  There  were 
special  expenditures  made  after  the  sale;  more  than  ordinary 
repairs,  namely :  renewing  bridges,  putting  down  new  rails, 
filling  up  the  Townsend  Valley,  and  an  extra  quantity  of  new 
ties,  all  of  which  do  not  come  under  ordinary  expenses."  "  The 
company  finally  paid  all  the  debts  for  which  the  directors  were 
liable."  Being  asked  the  reason  why  the  interest  on  the  third 
mortgage  bonds  was  paid,  and  the  second  mortgage  interest  not 
paid,  the  answer  was :  "  The  directors  did  not  consider  the  pay- 
ment on  the  second  mortgage  bonds  would  release  the  road  from 
its  difficulties,  and  concluded  it  better  to  pass  all  the  interest, 
and  use  the  money  for  the  use  of  the  running  expenses  of  the 
road."  Mr.  Benton  received  a  salary  of  $3,000  per  year  as 
President  and  attorney  for  the  road.  Being  asked  to  state  what 
he  knew  as  to  the  amounts  paid  by  Stevenson,  Ernst,  and  others, 


534  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

* 

for  their  interests  in  the  road,  when  he  retired,  he  said :  "  Mr. 
Bowler  made  a  stock  for  the  road  amounting  to  $1,100,000,  sub- 
ject to  the  mortgage  debts,  and  offered  the  same  to  the  pur- 
chasers at  fifty  cents  on  the  dollar.  He  said  to  me  they  had 
offered  him  thirty-five  cents,  but  how  much  they  decided  on,  I 
never  knew." 

M.  M.  BENTON. — Is  attorney  for  defendants  in  this  case.  Was 
elected  director  of  the  company  at  its  organization  in  1849,  and 
re-elected  until  elected  President  in  January,  1853,  and  served 
until  December,  1856.  al  acted  as  counsel  and  attorney  for 
the  road  from  its  organization  until  the  road  was  sold."  li  Was 
all  the  time  acting  for  the  road,  and  never  against  it.  I  became 
surety  for  the  company  in  various  ways ;"  "  and  am  yet  surety 
for  the  company  on  a  bond  to  the  county  of  Fayette,  to  indem- 
nify the  county  against  the  payment  of  twenty  lost  bonds  of 
$1,OOX)  each.  The  notes  and  bills  upon  which  I  was  indorser 
was  paid  off  just  before  the  sale  of  the  road."  Witness,  and 
other  stockholders,  solicited  Bowler  to  become  a  director,  which 
he  did.  At  his  election  he  was  the  largest  individual  stockholder, 
and  held  large  amounts  of  the  second  and  third  mortgage  bonds. 
"  The  estimation  held  by  the  community  of  Mr.  Bowler  was, 
that  he  was  a  man  of  wonderful  energy  of  character  and  activity, 
of  large  means  and  great  resources,  and  had  few  equals  as  a 
financier."  At  that  time  the  credit  of  the  company  was  very 
low,  and  supplies  had  to  be  purchased  on  individual  credit  of 
the  directors.  "The  friends  of  the  company  were  gratified  at 
his  [Mr.  Bowler's]  election,  and  it  tended  to  inspire  new  confi- 
dence that  the  road  might  be  extricated  from  its  difficulties." 
The  suspension  of  the  payment  of  interest  on  its  bonded  debt 
enabled  the  company  to  pay  promptly  for  supplies  and  current 
expenses ;  and  in  this  respect  the  credit  of  the  company  was 
improved.  It  also  enabled  the  company  to  discharge  some 
pressing  debts  which  were  in  execution,  where  property  was 
attached,  etc.,  and  save  the  sureties.  AH  the  mortgage  bonds 
were  sold  at  the  time  Bowler  became  a  director.  Mr.  Benton 
gave  the  same  account  of  the  indorsements  by  the  directors  as 
did  Mr.  Levis,  and,  as  shown  by  the  extracts  from  the  minutes, 
for  portions  of  which  judgments  were  obtained  and  levies  made 
on  his  and  the  property  of  his  co-sureties.  Witness  was  one  of 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  535 

the  attorneys  for  the  company  in  the  foreclosure  suit,  prepared 
the  answer,  and  appeared  for  the  company  on  the  trial.  "In 
all  my  interviews  with  Mr.  Bowler,  when  he  was  a  director  of 
the  road,  he  manifested  great  anxiety  to  defend  the  suit  as 
effectually  as  possible,  and  to  defeat  it,  if  it  could  be  done.  I 
thought  then  that  he  was  in  earnest,  and  his  actions  a  real  de- 
fense to  the  action,  and  a  desire  to  defeat  it.  He  was  largely 
interested  in  the  road,  and  employed  Judge  Gholson  to  assist  in 
the  defense,  to  prevent  the  sale.  Also,  to  protect  Mr.  Bowler's 
interest  as  bondholder,  in  reference  to  the  question  of  priority 
in  the  event  of  judgment  against  the  company.  I  had  confer- 
ences with  Judge  Grholson  upon  the  questions  arising  in  that 
case.  Bowler's  defense  continued  up  to  the  judgment." 

Mr.  Benton  again  gave  an  account  of  the  embarrassed  con- 
dition of  the  road  at  the  time  and  before  the  commencement  of 
the  suits — the  judgments,  levies,  attachments,  etc.  During  the 
first  part  of  the  war,  and  afterward,  when  the  rebels  were  burn- 
ing the  bridges,  depots,  etc.,  "  many  looked  upon  it  [the  road] 
as  destroyed,  and  that  Mr.  Bowler  would  be  ruined  by  it.  I 
don't  think  the  road  would  have  sold  in  1861,  1862,  or  1863  for 
as  much  as  it  did  sell  for  in  1859;  though  in  1863  it  began  to 
do  a  large  business,  and  did  appear  to  do  a  large  business  for 
the  remaining  part  of  the  war." 

On  cross-examination,  Mr.  Benton  said  he  had  attended, 
principally,  to  the  taking  of  depositions  in  this  case  on  the  part 
of  defendants.  His  associate  counsel  were  M.  C.  Johnson  and 
Judge  Goodloe,  of  Lexington  (the  latter  of  whom  was  the  judge 
ordering  the  sale  of  the  road),  Harvey  Myers,  and  Carlisle  & 
O'Hara.  The  remaining  part  of  the  debt  for  which  witness 
was  liable,  and  which  was  paid  shortly  before  the  sale,  was 
about  $24,000.  No  suit  was  brought  against  the  company  on 
any  of  the  bonds,  the  interest  on  which  had  been  suspended 
November  12,  1857,  until  after  the  foreclosure  suit,  when  suit 
was  brought  on  the  income  bonds.  Their  suit  was  in  the  fore- 
closure proceedings,  and  "they  opposed  the  sale."  "I  did  in- 
sist that  the  paper  upon  which  I  was  bound  should  be  paid 
before  the  sale,  before  any  suit  was  brought,  and  all  the  time 
from  the  period  when  I  left  the  company."  Being  asked  the 
question  if  the  company  could  not  have  paid  current  expenses, 


536  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

and  interest  on  the  first  and  second  mortgage  bonds  (not  taking 
the  amount  on  which  the  suspension  of  12th  November,  1857, 
was  made,  into  account),  Mr.  Benton  said :  "  I  only  know  its 
financial  condition  from  its  reports.  They  show  it  had  not  the 
means  to  pay  the  interest  on  the  first  and  second  mortgage 
bonds,  besides  the  running  expenses  and  repairs  made,  and  the 
payment  made  on  its  floating  debt.''  In  1859,  "was  of  the 
opinion,  and  doubtless  told  Mr.  Levis  so,  that  I  thought  the  road 
ought  not  to  be  sold.  I  was  then  of  that  opinion,  and  hoped  to 
prevent  it.  I  did  not  think  it  was  necessary,  and  urged  that  an 
effort  should  be  made  to  capitalize  the  floating  debt,  income,  and 
third  mortgage  bonds ;  and  then  I  hoped  that  the  road  might  be 
saved  to  the  stockholders."  The  Board  left  the  subject  of  call- 
ing the  stockholders  together  to  vote  on  the  question  of  a  pre- 
ferred stock,  to  the  committee,  and  they  never  requested  such  a 
meeting,  finding  the  subject  required  more  labor  and  time  than 
they  could  give  to  it. 

W.  A.  DUDLEY. — Was  the  Commissioner,  and  made  the  sale  of 
the  road.  There  were  a  great  many  bids  at  the  sale.  The 
witness  said  he  lt  had  not  been  in  a  position  to  give  any  thing 
like  a  full  examination  of  the  property.  I  knew  the  roadway 
to  be  in  bad  condition,  and  the  rolling  stock  to  be  very  much 
depreciated  in  value,  for  want  of  proper  repairs.  Had  been 
connected  with  railroads  for  ten  years  previous  to  the  sale,  and 
thought  myself  competent  to  form  an  opinion  as  to  their  value. 
I  thought  the  price  paid  by  Mr.  Bowler  was  a  full  one."  Being 
asked  if  he  thought  the  company  was  able  to  continue  its  busi- 
ness, he  referred  to  his  reports,  and  said  that  at  that  time  he 
thought  they  could  not,  "without  great  forbearance  on  the  part 
of  its  creditors."  The  road  with  which  witness  was  connected 
was  the  Louisville  and  Lexington.  "  When  the  war  broke  out, 
Mr.  Bowler  offered  to  sell  me  his  road  at  the  price  at  which  he 
bought  it ;  and  he  seemed  anxious  to  sell  it  at  that  price,  saying 
he  would  make  some  reduction  to  a  good  purchaser.  I  declined 
all  his  propositions,  as,  in  the  state  of  the  country  at  that  time, 
I  thought  it  by  no  means  improbable  that  his  road  might  be- 
come comparatively  worthless.  About  the  time  the  sale  was 
confirmed,  Mr.  Bowler  offered  to  sell  me  his  road  for  what  he 
said  it  had  cost  him.  My  recollection  is,  that  the  amount  was 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  537 

$2,450,000,  as  he  included  the  securities  which  he  had  pur- 
chased (at  their  cost  price  to  him)  which  had  been  deprived  of 
any  value  by  the  sale." 

On  cross-examination,  Mr.  Dudley  said  that  on  the  6th  of 
April,  1860,  he  paid,  as  Commissioner,  to  Mr.  Bowler  for  mort- 
gage coupons  due  September  1,  1858,  $13,537.55;  for  coupons 
on  preferred  third  mortgages,  due  June  1,  1858,  $12,749.36  ;  and 
for  coupons  on  preferred  incomes,  $48,779.77.  On  the  6th  of 
October,  1860,  witness  paid  him  $13,460.63  on  second  mortgage 
coupons,  $9,134.45  on  preferred  third  coupons,  and  $46,180.99 
on  income  coupons.  On  the  5th  of  April,  1861,  paid  him  a  total 
of  $48,529.07  on  similar  coupons.  As  Commissioner,  by  order 
of  the  court,  purchased  from  Bowler  fourteen  preferred  thirds 
for  $9,899.60.  Also,  fifteen  more  for  $11,250;  also,  fourteen 
more  for  $10,500,  and  paid  him  therefor.  Also,  by  order  of  the 
court,  loaned  him  $22,000  on  the  10th  of  July,  1862,  from  funds 
in  his  hands  as  Commissioner. 

A.  H.  RANSOM  testified  to  the  correctness  of  copies  of  news- 
paper articles  published  in  the  Cincinnati  Gazette,  from  August 
10th  to  December  30,  1859,  concerning  the  road,  its  manage- 
ment, and  sale.  This  entire  deposition  was  ruled  out,  as  not 
being  taken  in  time  (a). 

ABSTRACT  OF  PROCEEDINGS  IN  THE  FORECLOSURE  SUIT. 

Petition  filed  November  29,  1858,  by  James  Winslow, 
Trustee,  making  the  Covington  and  Lexington  Railroad  Com- 
pany, Vallette,  Bowler,  and  other  representatives  of  the  first 
and  third  mortgage  and  income  bondholders,  and  the  Lexington 
and  Danville  Railroad  Company,  defendants.  Default  in  pay- 
ment of  the  interest  due  September  1,  1858,  on  second  mortgage 
bonds  is  alleged,  and  judgment  is  asked  to  be  put  in  possession 
of  the  road  for  the  purpose  of  paying  such  interest.  The 
u Proposition  to  Bondholders"  is  made  an  Exhibit,  as  evidence 

(a)  The  inquiring  student,  or  any  party  interested  in  railroad  management^ 
will  find  these  articles  in  the  printed  Record,  from  page  373  to  411.  The  entire 
record,  proper,  contained  420  printed  pages.  Besides  which,  it  was  agreed,  sub- 
ject to  all  exceptions,  that  the  printed  Record-book  of  proceedings  in  the  Fayette 
Circuit  Court  might  be  referred  to  for  any  matter  introduced  in  evidence  and 
contained  therein,  and  be  considered  for  such  purposes  a  part  of  the  record. 


538  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

of  misapplication  of  funds  of  the  road  to  debts  inferior  to  the 
bondholders.  December  27,  1858,  Amended  Petition  filed  ask- 
ing sale  of  the  road,  on  the  requisition  of  a  majority  in  interest 
of  the  second  mortgage  bondholders.  January  5,  1859,  Answer 
of  Vallette  filed,  joining  in  prayer  for  sale.  February  10th, 
Answer  of  Company  filed.  Also,  Answer  and  Cross-petition  of 
John  R.  Thornton  and  others,  income  bondholders,  praying  for 
the  preservation  of  the  road  and  its  incomes,  and  the  protection 
of  their  equitable  rights  to  be  paid  before  the  mortgage  bond- 
holders. February  14,  1859,  Answer  of  Lexington  and  Dan- 
ville Railroad  Company  filed,  setting  up  that  they  are  owners 
of  income  bonds,  and  judgment  creditors.  April  5,  1859, 
Amended  Answer  of  the  Lexington  and  Danville  Railroad  Com- 
pany, setttng  up  that  plaintiff  was  entitled  to  sale  only  to  pay 
11  unpaid  interest;"  that  the  profits  of  the  road  would  more 
than  pay  the  interest  on  first  and  second  mortgages,  as  about 
$100,000  per  year  would  pay  such  interest ;  and  that  such 
profits,  if  the  road  was  "  prudently  managed,  would  be  more 
than  $200,000  per  year ;"  alleged  the  misapplication  of  the 
funds  of  the  company  to  inferior  securities ;  and  asked  that  a 
Receiver  should  be  appointed,  to  preserve  the  road  and  protect 
the  equities  of  all  parties.  April  5,  1859,  Amended  Answer  of 
Vallette  filed,  withdrawing  his  prayer  for  sale,  and  joining  in 
the  application  of  the  Danville  Railroad  Company  for  a  Re- 
ceiver. August  3d,  William  W.  Branham,  for  himself  and 
other  stockholders,  and  the  city  of  Covington,  offered  Answers 
and  Cross-petitions,  setting  forth  their  equities,  to  which  the 
plaintiff  objected.  August  4th,  the  application  of  the  city  of 
Covington  was  overruled  by  the  court,  and  said  city  excepted 
thereto ;  and  it  was  ordered  that  Branham  and  others  should  be 
permitted  to  file  their  Answer  as  representatives  of  all  the 
stockholders,  but  not  as  a  Cross-petition.  "  But  said  Amended 
Petition  and  Answer  are  not  to  delay  the  trial,  but  the  case  is 
at  once  to  be  heard  and  decided."  Branham  and  others 
excepted  to  the  order  of  the  court  refusing  to  allow  their  An- 
swer to  be  filed  as  a  Cross-petition.  August  13,  1859,  JUDG- 
MKNT  AND  ORDER  FOR  SALE.  The  court,  after  expressing  its 
opinion  that  the  company  was  insolvent,  adjudged  that  the  first 
mortgage  bonds,  to  the  extent  of  $400,000,  was  the  first  lien ; 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  539 

the  second  mortgage  bonds,  amounting  to  $1,000,000,  the  second 
lien  j  the  third  mortgage  bonds,  "  held  at  the  commencement  of 
the  suit  by  H.  Vallette,  R.  W.  Keys,  S.  B.  Keys,  J.  C.  Butler,  and 
by  all  other  persons  except  R.  B.  Bowler  (a),  Augustus  Robbins, 
S.  J.  Walker,  and  J.  W.  Walker,"  the  third  lien ;  the  income 
bonds  that  were  sold  before  the  16th  of  July,  1855,  the  fourth 
lien  ;  and  the  remaining  third  mortgage  bonds,  the  fifth  lien,  etc. 
And  it  was  further  adjudged,  "  that  the  equity  of  redemption,  in 
regard  to  the  second  mortgage,"  should  be  forever  barred  and 
foreclosed,  and  the  road,  with  all  its  franchises  and  property 
(including  the  leases  of  the  connecting  roads),  should  be  sold  at 
public  auction,  the  purchaser  to  assume,  as  purchase-money,  the 
payment  of  the  mortgages  and  bonds  of  the  company  when  the 
same  fell  due  respectively,  and  the  interest  then  due,  or  becom- 
ing due  before  the  day  of  sale,  in  six,  twelve,  and  eighteen 
months,  with  interest  from  the  day  of  sale,  to  the  extent  of  the 
amount  of  his  bid  (b).  The  purchaser  was  to  give  security  to 
meet  the  terms  of  sale,  by  the  deposit  of  bonds,  or  mortgage 
security  on  real  estate  in  Kentucky,  or  Hamilton  County,  Ohio. 
The  purchaser  was  also  required  to  provide  a  sinking-fund  of 
$30,000  per  year,  and  a  renewal-fund  of  the  like  amount,  from 
the  latter  of  which  might  be  deducted  permanent  improvements 
on  the  road ;  and  be  subject  to  the  conditions  mentioned  in  Par- 
agraph II,  of  defendants'  Answer.  Branham  and  others  ex- 
cepted  to  the  judgment  and  order  of  sale.  August  16th,  on 
motion  of  the  Covington  and  Lexington  Railroad  Company, 
Stevens  and  Fearing  were  required  to  give  security  for  costs. 
October  29th,  W.  A.  Dudley,  Commissioner  to  make  sale  of  the 
road,  reported  that  he  sold  the  same  on  the  5th  of  October ;  and 
the  sale  was  confirmed.  Branham  and  others  excepted  thereto, 

(a)  Mr.  Bowler  was  afterward  allowed  to  prove  that  a  portion  of  bis  bonds, 
other  than  those  purchased  by  him  after  the  bringing  of  the  suit,  "were  acquired 
by  him  from  innocent  holders,  who  acquired  them  for  a  valuable  consideration, 
and  without  notice  of  a  prior  issue  of  the  income"  bonds;  and  the  amount  of  the 
preferred  thirds  were  finally  fixed  at  $337,000, — he  eventually  proving  to  be  the 
owner  of  all  of  them,  except  the  §133,000  owned  by  Vallette. 

(b)  As  Gedge's  bid  for  Bowler  was  §2,125,000,  it  embraced  the  first,  second, 
preferred  third,  and  part  of  the  preferred  income  bonds,  with  interest  and  cost  to 
the  extent  of  $387,997.02,  which  latter  amount  he  was  required  to  pay  as  above; 
namely,  in  six,  twelve,  and  eighteen  months,  with  interest. 


540  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

on  the  ground  that  Bowler  was  a  director,  and  could  not  pur- 
chase for  himself,  and  an  appeal  was  allowed  to  them ;  and  the 
city  of  Covington  was  allowed  an  appeal  from  the  order  refusing 
to  permit  her  to  become  a  party  to  the  suit  (a). 

The  case  was  elaborately  argued  before  the  Special  Judge, 
Hon.  JOHN  W.  MENZIES,  in  May  and  June,  1870,  by  Hons. 
HENRY  STANBERY,  JOHN  F.  FISK,  Judge  WARDEN,  and  PETER 
ZINN,  for  plaintiff,  and  Hon.  M.  C.  JOHNSON,  Judge  GOODLOE, 
M.  M.  BENTON,  and  HARVEY  MYEES,  for  defendants.  Printed 
briefs  were  also  submitted  to  the  court  by  Messrs.  Zinn,  John- 
son, Benton,  and  Myers,  the  shortest  of  the  four,  that  of  Mr. 
Johnson,  containing  fifty-four  pages.  On  the  20th  of  Septem- 
ber following,  Judge  MENZIES  delivered  a  written  opinion. 

ABSTRACT  OF  THE  SPECIAL  JUDGE'S  OPINION. 

After  first  stating  the  case,  the  Judge  proceeded  to  consider 
the  questions  arising  under  the  statute  of  limitations.  He  held 
that  the  action  was  not  for  the  recovery  of  real  estate,  and  con- 
sequently did  not  fall  under  the  provision  limiting  the  com- 
mencement to  within  fifteen  years  after  the  cause  of  action 
arose,  but  that  it  was  for  relief  on  the  ground  of  fraud,  and  was 
required  to  be  commenced  within  five  years  from  the  discovery 
thereof;  and  in  case  of  death,  within  two  years  thereafter,  or 
within  one  year  after  administration  on  the  estate.  That  the 
discovery  could  not  have  been  made  before  the  time  the  stock- 
holders went  into  the  Fayette  Circuit  Court,  which  was  on  the  3d 
of  August,  1859  ;  and  Bowler  dying  within  five  years  thereafter, 
and  the  suit  being  brought  within  one  year  after  administration, 
it  was  in  time :  "  This  action  is  not  barred  by  statute  of 
limitations." 

The  defense,  on  the  part  of  some  of  the  defendants,  of  being 
innocent  purchasers,  without  notice,  was  unavailable,  as  they  had 
knowledge,  or  could  have  easily  obtained  it.  The  effect  of  the 
foreclosure  suit  was  next  considered:  "Every  question  decided 
there  was  a  decision  binding  upon  the  parties  to  this  action." 

(a)  No  exceptions  were  taken  to,  or  appeal  asked  from,  any  of  these  orders 
or  judgments  of  the  Court  by  the  Covington  and  Lexington  Railroad  Company. 
Bowler  filed  no  answer  or  pleadings  in  the  case  until  questions  arose  touching 
the  priority  of  his  bonds. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  541 

Of  this  character  the  court  considered  the  decision  of  Judge 
GOODLOE,  that  the  fact  of  Bowler's  being  a  director  was  not  an 
objection  to  his  becoming  a  purchaser.  "Parties  having  the 
right  to  make  the  objection  did  make  it,  and  it  was  overruled, 
and  the  sale  confirmed.''  The  Fayette  Circuit  Court  "decided" 
that  the  plaintiff  was  insolvent.  "  If  the  company  was  insolvent, 
the  stockholders  were  not  injured  by  the  sale,  unless  the  prop- 
erty ought  to  have  brought  enough  to  have  paid  something  on 
the  stock."  "But  the  court  in  Fayette  did  not  decide  that  the 
stockholders  or  the  plaintiff  could  not,  in  this  court,  question 
the  holding  of  Bowler  under  the  sale.  It  was  not  decided  that 
the  beneficiary  could  not  successfully  claim  the  benefit  of  the 
purchase  of  his  trustee  upon  the  ground  of  fraud,  or  without 
asserting  fraud.  Upon  these  questions  the  plaintiff  is  not  con- 
cluded by  the  proceedings  in  Fayette." 

"  The  plaintiff  might  have  claimed  the  judgment  sought, 
upon  the  principle  that  the  beneficiary  has  a  right  to  the  benefit 
of  the  purchase  of  his  trustee  by  doing  equity.  The  action  is 
not  based  upon  this  right  in  equity.  The  relief  is  sought  upon 
the  ground  of  fraud,  and  upon  no  other  ground."  As  Bowler 
offered  to  surrender  the  road  on  December  22,  1859,  upon  terms 
considered  by  the  court  " not  unreasonable,"  his  holding  could 
not  be  considered  unfriendly  until  that  time  ;  and  from  thence 
"  he  was  permitted  for  more  than  four  years  to  treat  the  prop- 
erty as  his  own." 

Bowler  was  a  trustee,  and  was  bound  to  the  "  utmost  good 
faith"  to  the  stockholders.  "He  was  bound  to  make  every  ex- 
ertion to  preserve  for  them  this  valuable  property."  "  He  was 
bound  to  pay  the  debts  of  the  company,  and  save  the  road  for 
the  stockholder^,  if  possible,  with  the  means  and  power  given 
and  conferred  upon  him  by  them  and  the  charter.  When  he 
became  the  purchaser  of  the  road,  his  beneficiary — the  plaintiff 
or  the  stockholders — had  the  right  to  claim  the  benefit  of  his 
purchase  by  doing  equity  to  him.''  Bowler  was  aware  of  this, 
and  governed  himself  accordingly.  The  calling  of  Shawhan, 
Greer,  and  Zinn  upon  him  in  the  Summer  of  1860,  implied  an 
admission  that  he  might  dictate  terms ;  and  his  reply  showed 
that  he  then  considered  himself  in  a  position  to  sell,  and  not  to 
surrender  the  road  to  the  stockholders.  "  Why  was  not  Bowler 


542  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

then  attached  in  a  court  of  equity  ?"  He  was  allowed  for  three 
or  four  years  more  to  retain  the  position  he  had  taken  toward 
Shawhan.  In  the  mean  time  civil  war  existed,  but,  with  little 
interruption,  the  Kenton  Circuit  Court  was  open.  "  The  plain- 
tiff did  not  wish  to  get  back  the  road  upon  principles  which 
equity  would  have  enforced,  for  a  long  time  after  Shawhan's 
interview  with  Bowler.  It  was  a  long  time  before  its  managers 
became  satisfied  that  Bowler's  purchase  was  a  speculation. 
Meanwhile,  the  plaintiff  lost  its  right  to  elect  to  claim  Bowler's 
purchase,  and  the  sale  of  the  Fayette  Court  has  been  confirmed 
by  the  plaintiff  and  the  stockholders,  unless  such  fraud  has  been 
shown  as  entitles  the  plaintiff  to  relief  in  an  action  founded  upon 
fraud,  and  brought  within  the  time  allowed  by  law." 

The  court  then  proceeded  to  examine  the  question  of  fraud, 
and  the  testimony  bearing  thereon.  The  embarrassed  condition 
of  the  road  was  considered,  and  the  court  held  that  the  Fayette 
Court  had  decided  that  it  was  insolvent,  and  that  that  finding 
was  binding  on  the  Kenton  Court.  Although  Bowler  went  into 
the  road  to  protect  his  individual  interests,  the  court  thought  it 
did  not  follow  that  he  would  not  do  the  same  for  other  stock- 
holders. "  The  management  of  affairs  was  in  a  great  measure 
yielded  to  Bowler."  The  court  considered  the  action  of  the 
stockholders,  at  their  annual  meeting  in  1858,  as  u  approving  " 
the  suspension  of  interest,  and  the  issuing  of  the  u  $800,000 
circular ;"  and  attached  no  importance  to  the  fact  that  the  com- 
mencement of  the  suit  was  not  communicated  to  the  stockholders. 
"There  was  not  one  hundred  cents  to  the  dollar  in  this  failure 
to  give  information,  unless  the  directors  knew  that  the  stock- 
holders had  the  information,  and  this  is  not  shown  in  the  record." 
At  that  time,  the  court  say,  the  company  was  not  able  "to  pay 
the  interest  on  its  bonds  past  due  and  falling  due,  current  ex- 
penses and  floating  debts,  and  for  necessary  repairs,  improve- 
ments, and  additions.  But  it  might  have  paid  the  interest  on 
the  first  and  second  mortgages  without  stopping  the  business  of 
the  road.  All  other  creditors  would  have  acquiesced  in  the 
$800,000  circular."  The  stockholders  were  to  blame  in  re-elect- 
ing Bowler  with  the  old  Board,  if  the  "circular"  look<ed  to  the 
sale  of  the  road ;  and  by  reason  of  this  action,  the  plaintiff  was 
not  entitled  to  relief.  They  were  to  blame,  also,  in  the  position 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  543 

they  took  in  the  Fayette  Court  in  seeking  to  get  rid  of  the  pay- 
ment of  interest  on  the  bonds,  and  were  now  seeking  to  make 
the  stock  valuable  "  by  gaining  the  place  of  the  purchaser,  be- 
cause, as  it  is  alleged,  he  brought  about  the  sale  ;  and  they  show, 
or  it  is  shown  by  the  plaintiff,  that  all  of  Bowler's  conduct  down 
to  August,  1859,  was  approved  by  the  stockholders."  The 
court  held  the  plaintiff  estopped  by  the  action  of  the  stockholders, 
and  as  bound  by  their  course  in  the  Fayette  Court. 

"  Bowler  took  steps  to  prepare  himself  to  become  the  pur- 
chaser, or  to  make  the  road  bring. a  good  price,  after  he  made 
up  his  mind  in  that  direction.''  "  He  certainly  contemplated 
the  purchase  before  the  judgment  of  sale,  and  possibly  not  until 
after  Winslow's  action  had  begun.  But  after  he  did  make  up 
his  mind,  he  was  industrious  to  prepare  himself."  But  in  taking 
these  measures,  in  the  opinion  of  the  court,  there  was  nothing 
of  which  the  plaintiff  had  a  right  to  complain.  In  this  he  was 
aided  by  the  President  and  some  of  his  co-directors.  Bowler 
"does  not  appear  to  be  to  blame  for  the  loss  of  the  sum  of 
$46,000,  which  went  into  the  hands  of  some  of  the  directors, 
after  June,  1859,  and  was  set  down  to  'profit  and  loss.'  It  is 
not  clear  that  this  money  was  not  used  for  the  benefit  of  the 
company,  but  it  is  not  shown  that  it  got  out  of  the  hands  of 
these  directors  for  any  specific  use."  "  Bowler  was  opposed  to 
the  appointment  of  a  Receiver." 

The  conclusion  of  the  court  is  thus  stated :  lt  The  plaintiff 
has  failed  to  establish  the  fraud  alleged  against  Bowler.  His 
co-directors  participated  in  all  that  he  did,  and  the  stockholders 
sanctioned  all  that  was  done  by  him  before  the  judgment  in 
Fayette,  but  complained  of  his  omission  and  that  of  his  co- 
directors,  to  plead  against  the  validity  of  the  bonds.  Where- 
fore," it  was  adjudged  that  the  plaintiff's  petition  should  be 
dismissed,  and  that  the  defendants  should  recover  their  costs. 

IN  THE  COURT  OF  APPEALS. 

The  Appeal  came  up  for  trial,  at  the  Summer  term,  1871, 
and  was  set  specially  for  the  14th  of  November,  Chief  Justice 
WM.  S.  PRYOR,  and  Judges  B.  J.  PETERS,  WILLIAM  LINDSAY, 
and  M.  R.  HARDIN,  on  the  bench.  In  consideration  of  the 


544  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

importance  and  magnitude  of  the  case,  the  Court  extended  the 
time  for  argument  to  nine  hours  for  each  side.  It  lasted  for 
three  days,  two  counsel  being  heard  each  day,  in  this  order: 
HARVEY  MYERS,  opened  for  the  appellees,  and  was  followed  by 
JOHN  F.  FISK,  for  appellant.  On  the  second  day,  M.  M.  BENTQN, 
for  the  appellees,  and  STANLEY  MATTHEWS,  for  the  appellant; 
and  on  the  third  day,  M.  C.  JOHNSON,  for  appellees,  and 
HENRY  STANBERY,  for  appellant,  closed.  These  arguments  were 
reported  by  BEN.  PITTMAN,  the  stenographer,  printed,  and  fur- 
nished to  the  Court,  each  one  containing  about  one  hundred  pages. 
Printed  briefs  were  also  submitted  to  the  Court  by  Messrs. 
ZINN,  WARDEN,  W.  P.  D.  BUSH,  and  CRADDOCK  &  TRABUE, 
for  appellant,  and  by  Judge  GEO.  B.  M'KEE,  for  appellees. 

To  attempt  to  give  even  an  abstract  of  the  more  than  six 
hundred  pages  of  printed  arguments  and  briefs  laid  before  the 
Court  of  Appeals  in  this  case,  and  to  apportion  the  different 
points  between  the  counsel  presenting  them,  is  impossible.  It 
is,  therefore,  merely  attempted  to  give  the  leading  points  pre- 
sented on  both  sides  of  the  case,  together  with  brief  parts  of 
the  arguments  made  to  sustain  them.  By  the  practice  in  Ken- 
tucky, the  appellees  had  the  opening,  and  for  that  reason  that 
order  is  followed. 

ABSTRACT  OF  ARGUMENT  FOR  APPELLEES. 

I. — THAT  THE  CORPORATION  WAS  DISSOLVED  BY  THE  SALE  OP 
ALL  ITS  PROPERTY,  EFFECTS,  AND  FRANCHISES. 

These  premises  being  true,  the  suit  could  not  be  sustained. 
It  was  claimed,  that  all  its  property  and  franchises  were  mort- 
gaged and  sold,  and  that  this  transfer  and  sale  "  is  a  surrender 
of  the  privilege  of  being  a  corporation."  These  authorities  were 
cited:  Angell  &  Ames  on  Corporations,  sec.  772;  Harrison  v. 
Lexington  &  Ohio  R.  E.  Co.,  9  B.  Mon.  472 ;  Dudley  v.  Price, 
10  B.  Mon.  84;  Gowcr  v.  Davis  &  Smith,  2  Duvall,  17.  The 
judgment  of  sale  was  referred  to  as  working  a  forfeiture  and 
extinguishing  the  right  of  being  a  corporation,  within  the  points 
decided  in  these  cases. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  545 

II. — THAT    THE    FAYETTE,    AND    NOT   THE    KENTON   CIRCUIT 
COURT,  HAS  JURISDICTION  OF  THIS  ACTION. 

1.  It  was  claimed  that  all  matters  that  were  litigated  in  the 
foreclosure  suit — matters  of  defense  thereto,  and  all  others  con- 
nected therewith,  and  that  could   have  been  presented  in  that 
case — were  therein  passed  upon,  fully  adjudicated,  and  excluded 
the  Kenton  Circuit  Court  therefrom.     These  cases  were  cited : 
Talbott  v.  Todd,  5  Dana,  193  ;  Rochester  v.  Anderson,  3  Bibb, 
399;   Hay  den  v.  Booth,  2  Marshall,  354;    Carlisle  v.  Long,  3 
Marshall,  435 ;  Allen's  Heirs  v.  Hall,  1  Marshall,  526. 

2.  That  a  bill  of  review,  or  to  impeach  a  decree  for  fraud, 
must  be  prosecuted  in  the  same  court  that  decided  the  original 
action,  citing  Singleton  v.  Singleton,  8  B.  Mon.  343 ;  Hanna  v. 
Spott's  Heirs,  5  B.  Mon.  365 ;  Story's  Eq.  PI.  sees.  426  to  428. 

3.  Mr.  JOHNSON  claimed,  that  "under  the  second  mortgage, 
the  legal  right  to  a  sale  of  the  railroad  and  its  equipment  was 
perfect,  upon  a  default  for  sixty  days  after  demand,  in  the  pay- 
ment of  the   interest  due   1st  September,   1858;"  and  that  no 
subsequent    payment  would   impair  this   legal   right.     That  no 
default   in    Bowler    for  the  non-payment   of  that  interest  was 
charged  by  the   plaintiff;   u  and  in  addition,  it  was  sanctioned 
and  approved  by  the  stockholders  in  December,  1858." 

4.  Mr.  Johnson  repeated  some  of  the  reasons  given  by  Judge 
GOODLOE  for  ordering  a  sale ;   that  the  interests  of  the  public 
would  suffer  by  allowing  an  irresponsible  and  insolvent  corpora- 
tion (as  he  considered  the  plaintiff  at  that  time  to  be)  to  remain 
in  custody  of  the  road,  and  therefore  ordered  a  sale,  reserving 
the  power  to  control  the  same,  as  shown  by  that  clause  of  the 
order   of  sale  quoted  in   Paragraph  III,  of  the  answer.     As  a 
consequence  of  this  reservation  of  control,  counsel  claimed  that 
the  road  remained  in  the  custody  of  the  Fayette  Circuit  Court, 
and  that  it  still  so  remains ;  that  Bowler  first,  and  now  the  ap- 
pellees, are  running  it  under  its  supervision,  and  as  its  agents ; 
therefore,   the  present   suit  is  an  attempt   to  interfere  with  its 
vested  jurisdiction,  and,  indeed,  is  in  contempt  of  the  Fayette 
Circuit  Court.     Mr.  Johnson  said  :   "It  is  a  well-settled  principle 
of  equitable  jurisprudence  and  practice,  that  when  a  court  of 
equity  has  obtained  jurisdiction  of  a  trust,    it   will   retain   the 

jurisdiction  of  the  complete  administration  of   that  trust,  and 

35 


546  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

this  jurisdiction  becomes  exclusive  of  all  co-ordinate  courts." 
And  Mr.  BENTON  said  :  "An  injunction  would  have  been  awarded 
against  appellant,  if  asked,  to  quiet  the  possession  and  to  restrain 
appellees  from  further  action  j"  and  "  the  only  solution  of  this 
problem  is  for  the  appellant  to  begin  in  Fayette." 

III. — THAT  THE  CAUSES  OF  ACTION  IN  THIS  SUIT  WERE  IN- 
VOLVED IN  THE  FORECLOSURE  SUIT,  AND  ARE  BARRED  BY 
CONCLUSIVE  DECISIONS  IN  THAT  CASE. 

1.  Under  the  Code  of  Practice,  "  all  defenses,  both  legal  and 
equitable,  must  be  presented  in  the  one  civil  action,  and  conse- 
quently, all  defenses,  legal  and  equitable,  are  concluded  by  the 
judgment,  whether  presented  or  not.'' 

This  was  Mr.  Johnson's  position,  and  to  sustain  it,  he  cited 
Hawkins  v.  Lambert,  18  B.  Mon.  106,  and  GarvZr's  Adm'r  v. 
Strode,  5  Littell,  314.  It  remained  to  be  considered  whether 
the  equitable  matters  in  this  suit  were  so  set  up  in  the  fore- 
closure suit  as  to  preclude  their  examination  in  the  Kenton 
Circuit  Court. 

Mr.  Johnson  said :  "  If  the  appellants  have,  as  they  claim 
in  this  suit,  an  equitable  right  to  the  property,  they  had  it 
at  the  time  of  the  confirmation  of  the  sale,  and  should  have  as- 
serted it  at  the  confirmation,  as  the  effect  of  the  confirmation 
was  to  pass  to  Bowler  a  right  to  all  title,  legal  and  equitable  then 
in  the  appellant;  and  the  appellant  is  estopped  and  concluded 
from  asserting  any  claim,  legal  or  equitable,  to  the  property, 
the  sale  of  which  was  confirmed  by  the  final  judgment  of  the 
court,  until  that  confirmation  had  been  reversed,  annulled, 
or  modified  by  due  process  of  law."  "The  appellants,  by  ex- 
ceptions to  the  confirmation,  recognized,  in  express  terms,  that 
the  sale,  when  confirmed,  would  pass  to  Bowler  all  the  rights  of 
the  parties  to  the  property  purchased  in  his  individual  right,  and 
that  fact  formed  the  ground  of  one  of  the  exceptions."  "  All 
the  rights  and  equities  of  every  one  interested  in  the  property 
and  franchises  sold,  were  before  the  court,  and  all  equally  de- 
manding its  equitable  protection.  Its  sale,  by  the  operation  of 
law,  cuts  off  all  rights,  interests,  and  equities  of  whatever  kind 
or  description,  and  however  arising,  of  all  the  parties  to  the 
action,  and  vested  all  those  titles,  interests,  and  equities  in  the 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  547 

purchaser.  It  was,  therefore,  the  right  of  each  and  every  party, 
upon  the  question  of  confirming  the  sale,  to  present  to  the  court, 
for  its  protection,  all  those  rights,  interests,  and  equities  injuri- 
ously and  wrongfully  affected  by  the  judicial  sale,  and  to  exhibit, 
by  exceptions  and  proof,  all  the  facts  in  their  knowledge  which 
would  show  the  wrong  that  would  be  committed  by  passing 
those  rights  and  interests,  legal  or  equitable,  to  the  purchaser. 
If  the  court  will  not  protect  them,  there  is  the  remedy  by  appeal. 
If  the  evidence  to  show  the  wrong  is  not  discovered  until  too 
late  for  exception,  there  is  the  remedy  of  a  new  trial  to  be  had 
in  three  years  after  the  final  order,  according  to  sections  399, 
371,  373,  of  the  Civil  Code." 

The  plaintiff  being  a  party  to  that  suit,  and  Branham,  Desha, 
and  other  stockholders,  who  were  admitted  as  defendants,  ex- 
cepting to  the  confirmation  of  the  sale  to  Bowler  as  an  individual 
purchaser,  Mr.  Johnson  claims  that  it  "  concludes  the  following 
propositions:  1.  That  Bowler's  directorship  did  not  preclude  him 
from  purchasing  in  his  individual  right,  at  a  judicial  sale,  con- 
ducted wholly  by  the  court  through  its  commissioner.  2.  That 
there  was  no  dereliction  of  fiducial  duty  as  a  director  in  the 
matter  of  the  sale.  3.  That  the  sale  was  a  fair  sale,  conducted 
according  to  the  judgment  of  sale,  and  for  a  fair  price.  4.  That 
Bowler,  by  the  confirmation  of  the  sale,  had  the  right,  on  com- 
plying with  the  terms  of  sale,  to  the  absolute  legal  and  equitable 
title  to  the  property  purchased,  unincumbered  Avith  any  title,  legal 
or  equitable,  of  any  of  the  parties  to  the  action ;"  and  "  the 
appellant  being  estopped  and  concluded  on  these  propositions, 
is  barred  from  maintaining  his  present  suit." 

2.  It  was  also  claimed  that  the  court  passed  upon  the  ques- 
tion of  the  solvency  of  the  road,  and  subsequently  upon  the 
validity  of  Bowler's  bonds ;  and  therefore,  the  appellant  is  also 
estopped  upon  them,  as  matters  of  complaint. 

Upon  the  latter  point,  Mr.  Johnson  claimed :  il  The  court 
paid  them,  as  good  and  valid,  claims  and  liens  upon  the  property 
sold  and  the  proceeds  of  the  sale.  It  is  now  sought  to  set  aside 
this  direct  action  of  the  Fayette  Circuit  Court,  upon  a  subject 
undeniably  within  its  jurisdiction,  and  a  subject  on  which,  by 
the  nature  of  the  proceeding,  it  was  bound  to  act,  by  this  suit 
in  the  Kenton  Circuit  Court.  It  is  true  that  no  defense  was 


548  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

made  against  these  bonds  held  by  Bowler,  either  by  the  company 
or  the  stockholders  ;  they  permitted  judgment  and  satisfaction 
to  take  place  by  default.  Each  and  every  bond  held  by  Bowler 
could  have  been  contested  upon  all  legal  and  equitable  defenses ; 
and  by  the  well-settled  principles  of  law  and  equity,  all  defenses 
then  existing  were  as  much  concluded  by  the  judgment  by  de- 
fault as  they  would  have  been  by  an  adverse  decision,  had  those 
defenses  been  actually  put  in  issue  and  litigated.  It  is  true  that 
a  re-trial  could  have  been  obtained,  if  the  proper  grounds  of  dis- 
covery of  new  evidence,  or  new  matter,  could  have  been  shown ; 
but  the  re-trial  could  only  have  been  in  the  Fayette  Circuit 
Court,  and  within  three  years  after  the  final  orders. 

li  The  order  of  the  Fayette  Circuit  Court,  by  which  the 
bonds  held  by  BoAvler  were  allowed  and  paid,  all  were  made 
after  the  new  Board  of  Directors  came  into  office  in  December, 
1859,  and,  consequently  after  the  suit,  so  far  as  the  plaintiff  was 
concerned,  was  under  the  control  of  the  new  Board.  There  is, 
therefore,  no  excuse  for  not  objecting  to  the  allowance  and  pay- 
ment of  those  bonds,  on  account  of ^the  undue  influence  of  Bowler 
in  the  Board  of  Directors.  If  the  invalidity  of  these  claims  was 
not  discovered  until  after  the  decision  of  the  Fayette  Circuit 
Court  sustaining  them  in  full,  there  was  a  remedy  by  new  trial 
in  that  court  for  three  years  after  the  decisions  were  rendered. 
Sections  369-373  of  Code." 

IV. — LIMITATION   BY  TIME  AND  BY   OPERATION  OF  THE 

STATUTE. 

Under  this  head,  the  counsel  considered  all  points  of  defense 
involving  lapse  of  time,  including  alleged  ACQUIESCENCE  in,  and 
ELECTION  to  abide  by,  Bowler's  purchase  of  the  road. 

1.  Mr.  Johnson  first  considered  the  subject  of  Election  or 
Acquiescence  ;  and,  in  connection  therewith,  what  amount  appel- 
lant would  have  had  to  pay  him  had  they  avoided  the  sale  im- 
mediately thereafter.  Inasmuch  as  he  held  $611,000  of  third 
mortgage  and  income  bonds  which  stood  in  priority  next  to  the 
amount  covered  by  the  bid,  Bowler  "  would  have  continued  bid- 
ding up  to  at  least  $2,500,000,  and  at  that  price  would  not  have 
been  compelled  to  pay  more  to  others  than  he  paid  on  the  "bid  at 
which  he  purchased.  The  road,  therefore,  actually  cost  him  at 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  549 

least  $2,500,000,  partly  in  securities  of  the  company  and  partly 
in  cash.  This  was  the  amount  which  would  have  been  necessary 
for  plaintiff  to  have  paid  him  upon  an  avoidance  made  imme- 
diately after  the  sale. 

"Law  and  equity,"  Mr.  Johnson  claimed,  fixed  the  time 
within  which  this  election  to  avoid  must  be  exercised,  to  be  "  as 
soon  as  it  can  reasonably  be  done.''  He  cited  Arnett  v.  Cloudas, 
4  Dana,  300 ;  Willott  v.  Forman,  3  J.  J.  Marsh.  293 ;  Hoggins 
v.  Becraft,  1  Dana,  30 ;  Lightburne  v.  Cooper,  1  Dana,  273 ; 
Tiffany  &  Bullard  on  Trusts,  148. 

Mr.  Johnson  then  considered  the  controversies  in  the  news- 
papers concerning  Mr.  Bowler's  relations  and"  dealings  with  the 
road,  and  claimed  that  they  were  notice  to  the  stockholders 
and  to  the  plaintiff,  and  who  were  presumed  to  have  taken  no- 
tice, and  to  have  had  knowledge  thereof.  We  had  therein  been 
charged  with  the  design  of  bringing  the  road  to  sale,  and  of 
becoming  the  purchaser.  "Bowler,  denying  the  charges,  says 
to  the  stockholders,  '  Take  the  road  at  my  purchase.'"  "He 
says  to  the  stockholders  and  company  :  l  Take  all  my  purchases 
at  the  price  I  paid  for  them,  and  six  per  cent  interest.  You 
shall  have  the  whole  benefit  of  all  the  sharp  trading  in  these 
securities  with  which  I  am  charged.' ':  Mr.  Johnson  proceeded 
to  show  the  reasonableness  of  this  proposition ;  and  entering 
into  details,  showed  the  road  would  have  cost  the  stockholders 
$2,736,820  under  this  proposition.  The  only  question  was, 
whether  sufficient  time  was  given  for  its  acceptance ;  and  on 
this  point  Mr.  Johnson  said:  "It  was  a  matter  on  which  Mr. 
Bowler  had  the  right  to  require,  on  the  part  of  those  inter- 
ested, and  who  laid  claim  on  him  as  their  agent  and  trustee, 
prompt,  decisive,  and  energetic  action.  Justice,  equity,  and  law 
sustain  him  in  this  clause.  He,  unaided  and  alone,  was  required 
to  exert  still  greater  promptness,  decision,  and  energy.  He  was 
compelled  to  manage  and  run  the  railroad,  and  superintend  all 
its  workings,  and  make  provision  for  all  its  necessities.  He  had 
to  raise,  by  his  individual  resources  and  credit,  of  principal  and 
interest,  $411,800,  in  six,  twelve,  and  eighteen  months,  to  pay 
the  cash  portion  of  the  purchase,  besides  paying  the  semi-annual 
interest  on  $1,737,000  of  bonds,  and  $60,000  annually  for  the 
sinking  and  renewal  fund  required  by  the  judgment,  after 


550  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

having  weakened  his  ability  and  diminished  his  resources  by 
the  deposit  of  $200,000  in  good  securities  as  collateral  security 
for  the  prompt  payment  of  the  bonded  mortgage  debt.  The 
rotten  and  unsafe  condition  of  the  bridges  and  Townsend  trestle- 
work  imperatively  demanded  a  heavy  outlay  in  rebuilding  them 
for  the  safety  of  the  lives  and  property  of  the  public.  It  is, 
therefore,  not  to  be  wondered  at,  that  Bowler  should  shrink 
from  the  magnitude  of  the  task  before  him,  and  the  weight  of 
the  burden  upon  his  single  shoulders." 

As  evidence  of  Mr.  Bowler's  willingness  to  surrender  the 
road,  Mr.  Johnson  claimed,  that,  after  "three  years  of  trial  and 
difficulty,  he  sold  to  the  joint  stock  company  now  owning  it,  the 
whole  purchase  at  $2,000,000,  bonds  and  cash,  being  $125,000 
less  than  he  paid  for  it,  and  $400,000  less  than  he  offered  it 
back  to  the  stockholders  of  the  company."  As  to  the  offer  to 
surrender,  Mr.  Johnson  cited  Roach  v.  Hudson,  reproduced  in 
this  work,  page  418. 

In  regard  to  the  proposition  to  surrender,  Mr.  Benton  said 
they  tl  did  not  accept  the  proposition,  thereby  electing  not  to 
take  the  road,  but  that  Mr.  Bowler  should  make  the  improve- 
ments and  keep  the  property.  They  knew  that  the  repairs 
must  be  immediately  made,  else  the  road  could  not  be  safely 
operated.  They  knew  the  terms  upon  which  the  road  had  been 
sold,  and  with  which  Bowler  had  to  and  did  comply;  and  that 
it  required  considerable  sums  of  money  to  meet  the  cash  pay- 
ments under  the  sale,  and  heavy  security  to  be  furnished ;  so, 
altogether,  the  burthen  was  too  heavy  and  the  risk  too  great  to 
incur  for  the  property;  hence,  after  all  that  had  been  said  and 
written  about  the  bad  conduct  of  the  directory,  and  especially 
of  Mr.  Bowler,  and  about  the  sacrifice  of  '  the  valuable  property/ 
they  concluded  again,  as  they  had  done  at  and  previous  to  the 
sale,  that  the  property  was  not  worth  the  sum  for  which  it  had 
been  sold,  and  that  they  would  not  take  it,  but  would  and  did 
give  it  up." 

2.  The  Statute  of  Limitations,  Mr.  Myers  claimed,  barred  the 
suit.  It  was  a  suit  for  relief  on  the  ground  of  fraud,  and  barred 
in  five  years,  sec.  2,  art.  3,  ch.  63,  2  Stanton's  Rev.  Statutes  of 
Kentucky,  127.  That  this  action  was  not  to  recover  real  estate 
was  sufficiently  answered  by  reference  to  the  charter  of  the 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  551 

"company,  which  makes  its  capital  stock,  that  is,  its  entire 
property,  personal  estate,"  sec.  2  of  original  charter,  Acts  of 
1847,  page  41. 

Mr.  Myers  claimed,  that  previous  to  the  adoption  of  the  Re- 
vised Statutes  of  1852,  there  was  no  provision  of  the  Statute  of 
Limitations  applying  to  injuries  resulting  from  fraud ;  but  since 
that  time,  all  actions  of  that,  character  are  limited  by  that  pro- 
vision. He  said  :  u  This  will  be  plain  when  it  i^  considered  that 
in  every  action  for  relief  on  the  ground  of  fraud,  the  party  must 
recover  either  realty,  personalty,  or  money.  Now,  as  there  are 
specific  provisions  in  the  statute  (independent  of  that  relating  to 
fraud)  prescribing  the  time  within  which  all  actions  to  recover 
real  estate,  personal  property,  or  money,  must  be  commenced,  this 
provision  fixing  the  time  within  which  actions  for  relief  on  the 
ground  of  fraud  must  be  commenced,  could  never  be  relied  on  in 
any  case,  were  the  construction  contended  for  on  the  other  side 
correct,  inasmuch  as  it  would  always  be  said  that  the  object  of 
the  action  was  to  recover  either  property  or  money,  and  there- 
fore the  provisions  of  the  statute  which  limit  actions  for  the 
recovery  of  property  or  money,  must  apply,  and  not  the  pro- 
vision limiting  actions  for  fraud.  This  would  virtually  repeal 
the  clause  limiting  actions  for  fraud,  and  leave  the  statutes  pre- 
cisely as  they  would  stand  without  it."  As  sustaining  this  con- 
struction, Mr.  Myers  cited  Sears  v.  Shafer,  2  Selden,  268;  Salve 
v.  Ewing,  1  Duval,  271  ;  Hieronumus  v.  Mayhall,  I  Bush,  508; 
Dye  v.  Holland,  4  Bush,  635. 

As  to  the  alleged  delay  in  discovering  the  frauds,  Mr.  Myers 
claimed  that  the  time  commenced  running  from  the,  commission 
of  each  alleged  act  of  fraud.  "  The  only  one  entitled  to  any 
consideration  is  the  charge  that  the  directors  refused  to  pay  the 
interest  when  they  were  able  to  do  so,  and  thereby  induced  the 
suit  for  foreclosure."  The  suspensions  on  the  payment  of  interest 
in  1857  and  1858  were  known  to  them  when  they  took  place, 
and  therefore  they  could  claim  no  delay  on  that  account.  "  But 
if  any  thing  was  unknown,  they  were  advised  of  enough  to  put 
them  upon  inquiry.  They  were  advised  of  the  suspension  of 
interest,  and  of  the  statements  in  the  circular.  These  were  acts 
done  by  their  agents  in  their  pi'esence.  They  were  acts  of  a 
great  and  serious  character,  going  to  the  vital  interests  of  the 


552  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

corporation,  and  of  each  individual  stockholder.  They  had  no 
right  to  sleep  and  dream  away  seven  mortal  years  before  con- 
cluding to  look  into  matters  and  see  whether  they  were  true  or 
or  not."  Angeli  on  Limitations,  sec.  187;  Farriham  v.  Brooks,  9 
Pick.  212  ;  Bishop  v.  Little,  3  Greenleaf,  405  ;  .Champion  v.  Rigly, 
1  Russ.  &  Myl.  539,  were  cited  as  authorities  on  these  points. 

.  Mr.  Johnson  urged  that  the  suit  was  barred  in  three  years, 
under  sec.  373  of  the  Code ;  and  that  the  remedy  was  in  the 
Fayette  Circuit  Court. 

As  to  the  additional  time  allowed  by  the  death  of  the  party 
within  the  limit  fixed  by  the  statute,  it  was  claimed  that  Bowler 
having  conveyed  the  road  to  Ernst  and  Keith  in  trust,  the  statute 
did  not  stop  running.  Mr.  Myers  claimed  that  "  there  never  has 
been,  at  any  time  since  Mr.  Bowler  took  possession  of  the  road, 
the  lack  of  proper  and  sufficient  parties  against  whom  an  action 
for  the  recovery  of  the  road  could  have  been  brought."  And  Mr. 
Johnson  claimed,  that  if  l{  the  appellant  succeed  in  this  suit  in 
recovering  the  equitable  title  to  the  property  purchased  by 
Bowler,  the  recovery  will  not  be  of  Bowler,  but  of  Ernst  and 
Keith,  and  they,  not  Bowler,  will  be  adjudged  to  be  trustees  for 
appellant,  and  holding  for  their  benefit."  In  case  of  recovery, 
an  account  would  have  to  be  stated  of  the  earnings  of  the  road 
previous  and  after  the  conveyance  to  the  trustees,  but  they  "  are 
the  parties  in  behalf  of  and  against  whom  the  account  would 
have  to  be  stated."  u  The  frauds  charged  against  Bowler  could 
be  proven  against  Ernst  and  Keith,  his  trustees,  as  well  as 
against  his  personal  representatives  and  heirs.  Ernst  and  Keith 
are  his  legal  representatives  and  privies  in  estate  as  to  the 
specific  property,  the  recovery  of  an  equitable  interest  in  which 
is  the  object  of  this  suit.  No  doubt  Bowler's  representatives,  as 
well  as  the  other  stockholders,  are  proper  parties  to  this  action. 
Being  interested  as  cestuis  que  trust,  they  may  be  made  defend- 
ants, sees.  33,  34,  35,  of  the  Code.  But  it  does  not  follow  that 
they  must  be  defendants."  Mead  v.  Mitchell,  5  Abb.  106  ;  Hop- 
kirk  v.  Page,  2  Brockenbrough,  20;  Story's  Eq.  PI.  sec.  216, 
were  cited. 

V. — DEFENSE  ON  THE  MERITS. 

Mr.  Johnson  opened  his  argument  under  this  heading  with  a 
claim  that  the  Fayette  Circuit  Court  had  decided  that  the  com- 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  553 

pany  was  insolvent,  and  that  that  decision  was  conclusive  and 
binding  on  the  appellant.  He,  nevertheless,  proceeded  to  sus- 
tain this  position  by  statistics,  and  otherwise  to  prove  that 

1.  The  Company  was  insolvent  when  the  Road  ivas  sold. — He 
stated  that  the  road,  with  the  equipment  and  real  estate,  up 
to  the  5th  of  October,  1859,  cost  $4,167,447.19.  From  this  he 
deducted  discount  on  all  the  bonds  of  the  company,  and  interest 
on  bonds  and  floating  debt  above  the  earnings,  $1,078,293.22, 
leaving  the  "cash  cost  of  the  road,  $3,089,153.22."  Against 
this,  there  were  mortgage  and  income  bonds,  judgments,  and  in- 
terest, to  the  amount  of  $3,233,532.64;  making  an  "excess  of 
debt  over  cost,  $210,864.78."  With  this  result,  Mr.  Johnson 
concluded  that  "  as  the  debts  of  the  company  exceed  its  cost  by 
at  least  $144,179.42,  and  the  company  has  nothing  of  value  but 
the  road,  it  follows,  not  as  a  probability  but  as  a  mathematical 
truth,  that  not  only  all  its  capital  stock  has  been  sunk  and  lost  in 
discounts,  interests,  and  other  expenditures,  and  losses  above  its 
earnings,  but  that  it  would  require  the  payment  of  $144,179.42 
by  the  stockholders,  to  make  the  stock  cover  the  losses,  and 
bring  the  assets,  at  their  true  cost,  to  a  balance  or  equality  with 
the  liabilities."  "  The  stockholders  lost  nothing  by  the  sale. 
The  dead  can  not  be  killed." 

Mr.  Johnson  then  considered  the  value  of  the  road  with  ref- 
erence to  its  profitableness.  For  this  purpose,  he  stated  the 
debt  of  the  company  at  $3,300,000,  which,  at  seven  per  cent 
interest,  would  be  $231,000,  which,  with  the  amount  required 
for  permanent  improvements,  would  increase  the  amount  neces- 
sary to  be  expended  on  the  road  annually,  to  $261,000,  "for 
which  there  could  only  be  reasonably  calculated  $225,000  of  net 
earnings,  leaving  an  annual  deficiency  of  $36,000,  which  would 
accumulate,  or,  what  is  far  worse,  the  road  and  equipments 
would  be  allowed  to  go  to  decay,  and  worn  out." 

Mr.  Johnson,  therefore,  concluded  with  Henry  Vallette,  that 
the  company,  at  the  time  of  the  suspension  on  the  payment  of 
interest,  was  "  irretrievably  bankrupt."  "  This  opinion  was 
wide-spread  in  the  community,  and  shared  by  the  holders  of  all 
the  bonds  and  securities  of  the  company.  It  was  shown  by  the 
price  of  income  bonds,  which  were  secured  by  lien  on  all  the 
property  of  the  company,  and  to  be  worth  par,  only  required  the 


554  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

property  to  be  worth  $2,525,000,  in  addition  to  the  arrears  of 
interest  on  the  second  mortgage  bonds." 

2.  Denial  of  Fraud. — Mr.  Johnson  proceeded  to  examine 
critically  the  charges  brought  against  Mr.  Bowler  of  fraudu- 
lently bringing  the  road  to  sale,  and  first  considered  the  "  Prop- 
osition to  Bondholders,"  and  the  suspension  of  interest  on  the 
second  mortgage  bonds,  together.  "The  charge  is  not  merely 
false  ;  it  is  ridiculously  absurd.  The  directory,  leaving  Bowler 
out  of  view,  was  composed  of  gentlemen  of  high  intelligence, 
whose  honor,  integrity,  and  devotion  to  the  best  interests  of  the 
company,  and  knowledge  of  its  condition,  was  unquestionable. 
If  that  proposition  was  a  gross  exaggeration  of  the  defects  of 
the  road,  so  plain  and  palpable  as  to  amount  to  fraud,  would 
they  have  given  it  their  unanimous  approval!"  "The  repre- 
sentatives of  Bowler  might  here  leave  this  charge  crushed  by 
the  two  overwhelming  facts  of  its  unanimous  adoption  by  the 
President  and  directors,  and  unanimous  indorsement  of  the 
stockholders.  The  appellees  go  further,  and  assert  that  the 
statements  of  the  'proposition '  are  true,  and  the  estimates  of  the 
sum  necessary  for  the  purposes  stated  in  the  'proposition '  is  low, 
and  that  what  was  proposed  to  be  done  was  the  only  means  by 
which  the  company  could  retrieve  its  bankruptcy  and  regain  a 
sound  credit.  Mr.  Levis  so  testified.  It  was  proposed  to  pay 
the  debt  on  which  the  directors  were  personally  bound,  to  com- 
plete the  road,  and  put  the  road  and  equipments  in  the  condition 
of  a  first-class  road.  To  do  this,  required  the  laying  of  the  track 
from  Paris  to  Lexington,  the  thorough  ballasting  and  repair  of 
every  part  of  the  road,  the  building  of  capacious  depots  for 
freight  and  passengers  at  Covington  and  Lexington,  and  smaller 
ones  at  Paris,  Cynthiana,  and  Falmouth,  and  station-houses  at 
ten  or  twelve  stopping-stations,  water-stations,  wood-sheds,  etc., 
and  a  large  increase  of  the  rolling  stock,  including  four  new 
locomotives,  and  a  great  number  of  cars  for  passengers  and 
freight."  And  Mr.  Johnson  furnished  this  "Estimate  of  cost :" 

"To  complete  travel  from  Paris  to  Lexington,         .         .         .  $200,000 
Clements's  estimate  of  cost  for  enabling  road  to  get  along  for 

three  years,  and  not  for  first-class  road,    ....  206,715 

Additional  ballasting  above  Clements'a  report,     .         .         .  40,000 

Additional  locomotives  and  cars, 60,000 

Additional  new  iron  and  rolling  of  old  iron,        .         .         .  50,000 

Depots  at  Covington  aud  Lexington,  $50,000,          .        .        .  100,000 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  555 


Depots  at  Paris,  Cynthiana,  and  Falmouth,  .  .  .  $30,000 

Passenger  and  freight  station-houses 20,000 

Debt  on  which  directors  and  officers  were  personally  bound, 

and  debts  to  employees  for  services,  estimated  at  $100,000. 

but  turning  out '       171,000 


$867,715" 

This  did  not  include  tKe  right  of  way  through  the  Baptist 
College  grounds,  which  the  directors  were  able  to  settle,  ll  and 
get  some  valuable  land  in  Covington,  for  $27,000.  This  claim 
was  superior  to  all  the  mortgages,  being  a  first  lien  for  purchase- 
money,  and  would  be  enforced  at  any  moment  by  an  injunction 
against  its  use  by  the  road  until  settled."  The  reason  of  the  dis- 
crepancy between  this  estimate  and  that  of  Clements,  was  be- 
cause the  latter  was  for  only  three  years,  whereas  the  other  was 
for  Jive  years. 

Mr.  Benton  maintained  the  same  line  of  argument ;  and  the 
letter  of  Mr.  Bowler  to  T.  D.  Carneal  was  quoted  to  show  the 
former's  sincerity  in  favoring  the  "Proposition."  "It  may  be 
certainly  said,  that  to  Bowler  there  appeared  no  other  resource 
or  plan  by  which  the  company  could  be  saved." 

The  failure  to  pay  interest. — "  In  regard  to  the  failure  to  pay  the 
interest  on  the  second  mortgage  bonds,  due  1st  September,  1858, 
and  1st  March,  1859,  it  would  be  sufficient  to  say,  that  the 
failure  to  pay  was  in  pursuance  of  the  announced  intention  in 
the  Proposition  to  Bondholders,  which  has  just  been  discussed, 
and  which,  together  with  the  actual  suspension,  was  fully  ap- 
proved by  the  stockholders  in  their  annual  meeting  in  January, 
1858.  But.  in  addition,  the  company  had  no  funds  with  which 
to  make  those  payments." 

3.  Depreciating  the  value  of  the  Company's  property  and  se- 
curities.— This  was  denied.  "  On  the  contrary,"  it  was  said  by 
Mr.  Johnson,  "  it  is  asserted  that  there  was  no  one,  whether 
director,  bondholder,  or  stockholder,  who  had  a  higher  apprecia- 
tion of  the  value  of  the  railroad  property  and  its  securities,  or 
who  more  zealously  and  publicly  announced,  advocated,  and 
endeavored  to  impress  upon  others  that  high  appreciation,  than 
R.  B.  Bowler."  In  proof  of  this,  the  "  Proposition  to  Bond- 
holders "  and  his  Carneal  letter  were  referred  to  as  conclusive 
evidence.  Also,  his  proposition  to  the  stockholders  to  tax  them- 
selves to  raise  the  necessary  amount  to  save  the  property.  "  His 


556  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

'light  was  not  hid  under  a  bushel/  but  placed  upon  the  hill-tops." 
"It  is,  however,  true  that  Bowler,  like  every  one  else  with  two 
ideas  in  his  head,  was  impressed  with  the  danger  of  the  road 
being  sacrificed,  and  the  value  of  the  inferior  securities  being 
destroyed  by  a  forced  sale  under  the  foreclosure  suit  in  the  Fay- 
ette  Circuit  Court.  In  the  Spring  01*1859,  Bowler  learned,  from 
the  promptness  with  which  process  had  been  fully  executed, 
answers  enforced,  and  the  necessary  proof  taken  by  the  plaintiff, 
and  the  general  energy  with  which  the  suit  was  prosecuted  by 
the  plaintiff's  lawyers,  and  the  well-known  dispatch  with  which 
the  judge  of  that  court  finished  the  business  on  the  equity  side 
of  the  court,  that  the  expectations  he  expressed  in  his  letter  to 
Carneal,  of  a  protracted  chancery  suit,  were  not  well-founded. 
If  a  sale  should  be  ordered,  it  was  the  general  belief  that  the 
terms  for  the  whole  amount  would  be  cash,  or  credits  of  six, 
twelve,  and  eighteen  months.  Indeed,  by  the  provisions  of  sec- 
tion 405  of  Code  of  Practice,  longer  credits  could  not  be  given, 
except  by  the  consent  of  the  plaintiff,  which  consent  was  act- 
ually given  afterward,  at  the  trial. 

ult  was  late  in  the  Spring,  and  in  the  Summer  and  Fall  of 
1859,  that  Bowler  commenced  largely  purchasing  the  inferior 
securities  of  the  company.  In  his  tradings  with  those  sharpers, 
the  Third-street  brokers  of  Cincinnati,  there  is  evidence  that  he 
used  the  danger  of  this  judicial  sale  as  proof  that  the  price  he 
was  willing  to  give  was  their  full  value.  No  doubt  those  keen 
Third-street  brokers  did  not  fail  to  avail  themselves  of  Bowler's 
well-known  and  published  high  appreciation  of  the  value  of  the 
bonds,  and  also  of  his  estimate  of  the  securities  by  his  willing- 
ness to  purchase.  There  was  not  the  slightest  difference 
between  the  two  opinions.  Bowler  was  acting  upon  both  in 
purchasing.  He  was,  by  purchasing  these  inferior  securities, 
enabling  himself  to  prevent  a  sacrifice  of  the  road,  and  of  the 
large  amount  of  securities  he  already  held,  while  his  high  opinion 
of  its  value  gave  him  nerve  to  bid,  even  should  the  property  fall 
upon  his  hands.  With  his  characteristic  boldness  and  energy, 
he  was  guarding  himself  against  threatening  dangers,  by  bravely 
meeting  and  fighting  them,  while  the  Third-street  brokers 
shunned  the  danger,  by  turning  their  backs,  retreating,  and 
abandoning  the  field,  by  selling  out. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  557 

"When  the  uncertainties  of  the  law  resulted  in  Bowler's 
success,  and,  by  the  decision  of  the  court  and  result  of  the  sale, 
the  securities  sold  to  Bowler  became  doubled  in  value,  there 
seems  to  have  been  generated  in  their  feelings  that  intense  hate 
which  the  narrow-minded  sharper  always  entertains  toward 
those  who,  however  fairly,  get  the  better  of  him  in  a  trade. 
These  people  safely  vent  their  spite,  in  these  depositions,  on 
this  dead  man's  name.  Their  testimony,  given  ten  years  after 
the  transactions,  being  in  relation  to  statements  and  conversa- 
tions, in  addition  to  its  legally  recognized  unreliability,  is  further 
weakened  by  the  perversions  which  spite  and  hate  never  fail  to 
produce."  Bowler's  efforts  to  reduce  the  price  of  Butler's  bonds 
being  after  the  judgment,  "  it  could  have  no  effect." 

4.  "Failure  to  defend  the  suit  with  vigor,  and  especially  the 
failure  to  tender  into  court  the  interest  in  arrear  on  the  second 
mortgage,  which  the  net  income  enabled  the  directors  to  have  done, 
but  paid  on  a  debt  of  the  company  for  tvhich  the  directors  icere 
security." — Mr.  Johnson  said :  "  The  deposition  of  M.  M.  Benton, 
the  lawyer  of  the  company,  proves  that  the  directors  defended 
the  suit  with  full  vigor.     No  defense  could  be  made  to  the  legal 
right  of  sale,  which  was  undeniably  perfect  under  the  deed  of 
trust."     "  The  directors  offered  to  pay  into  court,  monthly,  all 
the  net  earnings  of  the  road  until  the  interest  in  arrear  was  paid, 
and  stated  their  confident  belief  that  those  earnings  would  ena- 
ble the  directors  to  pay  the  interest    on  the  second   mortgage, 
punctually."     The  court  refused  to  appoint  a  Receiver.     "  The 
only  thing  charged,  is  the  failure  to  tender  into  court,  about  the 
time  of  the  trial,  $70,000,  to  pay  the  interest  in  arrear  on  second 
mortgage  bonds.      If  there  had  been  a  reasonable  prospect  of 
such  a  tender  defeating  the  suit,  or  producing  any  valuable  de- 
lay, it  would  have  probably  been  raised  and  paid.''     And  it  was 
urged,  that   if  they  had  paid  the   interest,   then   the  directors 
would  have  had  to  pay  the  debt  for  which  they  were  security. 

5.  Matters  indicating  Boivler's  design  to  purchase  the  Road. — 
This  purchase  of  large  amounts  of  the   inferior  securities   was 
justified  on  the  ground  of  Bowler's  interest  in  the  road,  and  his 
right  to  anticipate  its  sale.     To  a  Receiver,  Bowler  "was  ut- 
terly opposed.     He  knew  full  well  the  careless,  slipshod,  waste- 
ful and  expensive  manner  in  which  all  property  placed  in  the 


558  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

hands  of  a  chancery  Receiver  is  managed,  and  that  such  man- 
agement of  a  railroad  is  ultimate  ruin.  He  knew  that  it  re- 
quired all  the  stimulus  of  strong,  individual  interest  in  the 
management  of  a  railroad,  to  produce  that  constant  watchful- 
ness, energy,  and  economy  necessary  to  its  success."  "In 
danger,  he  was  not  the  man  to  stand  still  and  be  crushed.  He 
energetically  prepared  to  guard  these  endangered  interests,  and 
to  that  end  purchased  largely  of  the  same  kind  of  securities  he 
already  largely  held." 

This  high  appreciation  of  the  value  of  the  road,  however, 
induced  him  to  outbid  all  other  competitors,  and  to  become 
the  purchaser.  But  he  did  not  desire  to  become  the  pur- 
chaser of  the  road.  "  How  little  he  desired  the  position  of 
sole  owner  and  manager  of  the  railroad  is  shown,  and  conclu- 
sively shown :  first,  by  his  offer  to  the  company  and  stockhold- 
ers ;  and,  secondly,  by  his  abortive  efforts  to  form  a  joint  stock 
company  with  Levis,  Gredge,  and  others."  And  it  eventually 
proved  a  great  loss  to  him.  Mr.  Benton,  on  this  point,  said : 
"It  seems  that  the  purchase  of  the  road  was  not  so  great  a 
speculation,  after  all  5  that  on  the  1st  of  January,  1863,  more 
than  three  years  after  the  sale,  and  after  the  payment  of  all  the 
sale  bonds  and  interest  on  the  bonded  debt  of  $1,737,000,  up  to 
that  period;  and  after  providing  the  $30,000  per  annum  as  a 
sinking  fund  to  meet  the  bonds  at  maturity  ;  and  after  expend- 
ing hundreds  of  thousands  of  dollars  in  finishing  and  repairing 
the  road,  supplying  rolling  stock,  paying  for  right  of  way,  and 
providing  station,  side-track,  and  depot  accommodations,  Mr. 
Bowler  sold  the  road  to  a  joint-stock  company  for  $2,000,000, 
being  $125,000  less  than  cost,  and  guaranteed  the  title." 

6.  Bowler's  right  to  purchase  the  property  and  securities  of 
the  Company  while  he  was  director — Mr.  Johnson  admitted  that 
•  Bowler  stood  in  the  relation  of  a  fiduciary  to  the  company.  "He 
was  not  strictly  a  trustee."  "Most  strictly,  he  was  an  agent, 
being  clothed,  by  his  office,  with  authority,  within  the  charter 
of  the  company,  to  manage  its  property  and  bind  it  by  contracts. 
An  agent  is  a  fiduciary.  The  general  rule,  sustained  by  abun- 
dant authority,  prohibits  any  fiduciary  from  purchasing  property 
within  the  range  of  his  fiducial  duties.  The  numerous  author- 
ities referred  to  by  appellant  sustain  this  position,  and  it  applies 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  559 

to  all  fiduciaries,  whether  trustees,  guardians,  agents,  or  attor- 
neys." "It  is,  however,  perfectly  recognized,  that  there  are 
cases  in  which  the  very  object  of  the  rule,  the  obtaining  of  the 
highest  price,  would  be  promoted  by  permitting  the  fiduciary  to 
bid.  This  occurs  whenever  the  fiduciary  has  a  strong  individual 
interest  in  the  highest  possible  price  being  obtained.  In  such 
cases,  he  is  permitted  to  bid  to  prevent  the  property  being  sacri- 
ficed, and  to  obtain  the  highest  price."  There  are  two  modes 
by  which  the  fiduciary  can  obtain  this  right  to  bid:  "  1.  The 
consent  of  the  beneficiaries,  who  must  be  competent  to  consent ; 
that  is,  not  infants  or  married  women,  imbeciles,  or  others  in 
like  condition.  2.  The  permission  of  a  court  of  equity,  which 
is  granted  as  a  matter  of  course,  where  the  fiduciary's  bidding 
would  promote  the  great  object  of  the  rule,  the  obtaining  the 
highest  price.  See  White  &  Tudor's  Leading  Cases,  167,  and 
the  case  of  Davoue  v.  Fanning,  2  Johns.  Ch.  252,  261,  262  j 
Dobson  \.  Raccy,  3  Saund.  61  ;  Breclzenridge  v.  Holland,  2 
Blatch.  377,  381."  Courts  of  equity  will  protect  real  rights; 
but  where  there  is  nothing  remaining  but  the  shell,  they  will 
not,  White  &  Tudor's  Leading  Cases,  151  ;  Parke  v.  White,  11 
Vesey,  209,  226. 

Applying  these  principles  to  the  present  case,  counsel  claimed 
that  after  the  judgment  of  foreclosure  and  sale,  Bowler  occupied 
no  real  or  substantial  relation  of  trustee  toward  the  appellant, 
because  it  was  a  mere  corporation  by  name.  "  That  decision, 
with  the  judgment  of  sale  based  upon  it,  reduced  the  interest  of 
the  stockholders  and  the  company  quod  that  suit,  and  all  subse- 
quent proceedings  in  it,  to  a  mere  legal  nominal  shell,"  and  the 
creditors  alone  had  a  real,  substantial  interest  in  the  property 
and  its  proceeds,  over  which  Bowler,  as  a  director,  had  no  con- 
trol or  care.  "  I  have  already  shown  that  the  insolvency  of  this 
corporation,  with  the  sale  of  its  property  and  franchises,  unlike 
the  insolvency  of  an  individual,  extinguishes  its  real  and  sub- 
stantial life,  leaving  it  only  vitality  to  wind  up  its  small  remain- 
ing business  and  assets,  outside  of  the  mortgages,  and  then  to  be 
buried  into  the  irrevocable  past."  From  the  day  of  that  judg- 
ment, the  equity  of  redemption  was  "forever  barred  and  fore- 
closed;" and  the  court  assumed  the  control  of  the  property,  and 
there  was  not  even  a  " legal  shell"  remaining  in  the  company. 


560  COV.  &  LEX,  R.  R.  CO.  v.  BOWLER,  ET  ALS-, 

No  formal  permission  to  bid  was  given  in  this  case,  "  because  it 
was  considered  by  the  court  that  it  was  unnecessary  to  have 
granted  a  previous  special  permission  to  bid."  That  question 
came  up  on  the  exceptions  of  the  stockholders,  and  was  decided ; 
and  not  being  reversed,  it  was  binding,  and  estopped  appellant. 
"Equity  disregards  mere  forms.  The  subsequent  sanction  of 
the  purchase  by  a  court  of  equity  is  fully  equivalent  to  a  pre- 
vious permission  to  bid.  By  not  obtaining  the  previous  per- 
mission of  the  court  of  equity  to  bid,  and  only  applying  for 
confirmation  after  the  bid,  the  trustee  is  compelled  to  show  a 
perfectly  clear  case,  that  his  bidding  did  contribute  to  obtaining 
a  higher  price  for  the  property  than  would  have  been  obtained 
without  it,  and  that  his  individual  interest  and  conduct  favored 
the  obtaining  the  highest  possible  price  for  the  property,  rather 
than  the  obtaining  the  property  at  the  lowest  price."  "  What 
evidence  was  produced  upon  the  hearing  of  the  exceptions  and 
confirmation,  does  not  appear."  But  these  matters  being  made 
satisfactory  to  the  court,  as  already  claimed,  Bowler  stood  and 
occupied  the  position  of  an  accepted  bidder,  and  the  question 
was  concluded. 

VI. — ERNST,  KEITH,  AND  ASSOCIATES,  BEING  INNOCENT  PUR- 
CHASERS, WERE  ENTITLED  TO  PROTECTION  AS  SUCH. 

"  In  addition  to  all  these  defenses  which  they  have  in  com- 
mon with  Bowler,  they  have  the  defense  of  having  purchased, 
without  notice,  of  the  plaintiff's  present  claim  ;"  and  this  defense 
is  too  well  established  to  need  authorities  to  illustrate  it.  They 
did  not  purchase  until  after  the  three  years  allowed  by  the  Code 
for  appeal  had  passed.  "  They  would  not  purchase  until  that 
judgment  had  been  confirmed  beyond  reversal,  by  the  acquies- 
cence of  all  the  parties  in  interest  for  three  years,  being  the  full 
period  allowed  for  the  disturbance  of  rights  sanctioned  by  judg- 
ment." Thus,  the  rights  were  fixed  by  the  decision  in  the  fore- 
closure suit,  and  by  time,  before  their  purchase. 

ABSTRACT  OF  ARGUMENT  FOR  APPELLANT. 

As  preliminary,  Mr.  BUSH  claimed  that  the  issues  and  de- 
fenses made  in  the  pleadings  were  different  from  those  argued,  in 
this:  1.  Appellees  did  not  plead  that  the  appellant  was  estopped 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  561 

by  the  judgment  of  sale  and  confirmation  in  the  foreclosure 
suit ;  2.  Nor  that  appellant  had  acquiesced  in  Bowler's  purchase 
for  his  own  benefit ;  3.  Nor  that  Bowler  had  offered  to  surrender 
the  road;  4.  Nor  that  appellant  had  elected  to  permit  Bowler 
or  his  associates  to  hold  the  road  for  their  own  benefit ;  5.  Nor 
that  appellant  was  insolvent  at  the  time  of  sale. 

Mr.  Bush  also  claimed,  that  inasmuch  as  the  Circuit  Court 
had  " ADJUDGED:"  1.  That  the  action  was  not  barred  by  the 
Statute  of  Limitations  ;  2.  That  none  of  the  defendants  were  in- 
nocent purchasers ;  3.  That  the  Kenton  Circuit  Court  had  juris- 
diction ;  and  4.  That  the  appellant  had  the  right  to  claim  the 
benefit  of  Bowler's  purchase;  and  appellees  not  taking  a  cross- 
appeal  therefrom, — they  had,  in  regard  to  such  defenses,  ACQUI- 
ESCED in  the  judgment  of  the  Circuit  Court  thereon. 

I. — As  TO  THE  APPELLANT  BEING  A  CORPORATION. 

This  point  having  been  twice  passed  upon  in  the  Circuit 
Court,  and  both  times  decided  in  favor  of  appellant,  by  Judge 
Doniphan  and  the  Special  Judge,  it  received  but  little  consider- 
ation in  the  Court  of  Appeals. 

1.  It  was  claimed,  that  the  Legislature  had  not  delegated  the 
power  to  pledge  the  franchise  of  existence ;  that  it  had  not  been 
pledged,  and  consequently  could  not  have  been  sold.     The  sale 
of  the  franchise  of  running  and  maintaining  a  railway  was  ad- 
mitted to  have  been  sold. 

2.  That  the  existence  of  the  corporation  was   admitted   by 
the    stockholders  being   called   together  at   the  annual  meeting 
after  the  sale ;  the  efforts  made  to  procure  an  approval  of  the 
sale  from  them ;   Bowler's  pretended  offer  to  return  the  road  to 
them,  and  his  negotiations  with  its  agents. 

II. — THE  QUESTION  AS  TO  JURISDICTION. 

On  behalf  of  the  appellant,  it  was  claimed,  that  the  petition 
in  this  cause  was  founded  on  an  original  cause  of  action,  distinct, 
in  itself,  against  Bowler  and  his  representatives,  the  appellees ; 
and  no  reversal  or  interference  with  the  Fayette  judgment  was 
asked. 

1.  If  the  road  is  not  in  the  possession  of  appellees,  but  in 
possession  of  the  Court,  and  the  rights  of  appellees  are  inchoate 

36 


562  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

and  imperfect,  and  they  are  the  agents  of  the  Court,  then  the 
appellant's  right  of  action  has  not  yet  accrued.  Consequently, 
the  other  defenses  of  a  bar  by  the  Statute  of  Limitations,  acqui- 
escence, lapse  of  time,  and  laches,  are  inconsistent  and  unavailing 
in  this  case.  But  the  appellant  is  not  attacking  the  decree  of 
the  Fayette  Circuit  Court  for  fraud  or  for  any  other  cause. 
There  is  no  allegation  of  fraud  against  Winslow,  or  prayer  for 
relief  against  him.  This  decree  will  stand  for  all  time ;  and  it 
is  not  asked  to  have  it  set  aside,  reversed,  or  modified  in  any 
manner. 

Judge  MATTHEWS  cited  Hill  on  Trustees,  144,  as  giving  the 
principle  upon  which  the  case  rests :  "  Whenever  the  circum- 
stances of  a  transaction  are  such  that  the  person  who  takes  the 
legal  estate  in  property  can  not  also  enjoy  the  beneficial  interest, 
without  necessarily  violating  some  established  principle  of  equity, 
the  court  will  immediately  raise  a  constructive  trust,  and  fasten 
it  upon  the  conscience  of  the  legal  owner,  so  as  to  convert  him 
into  a  trustee  for  the  parties  who,  in  equity,  are  entitled  to  the 
beneficial  enjoyment."  To  the  same  point  were  cited  and  read, 
Meader  v.  Norton,  1 1  Wallace,  457;  Kerr  on  Fraud,  286  ;  Coke 
v.  Izard,  7  Wallace,  559  ;  James  v.  Railroad  Company,  6  Wallace, 
752.  The  same  principle  had  repeatedly  been  adjudicated  in 
Kentucky.  In  Blight's  Heirs  v.  Tobin,  1  Mon.  612,  a  defense 
similar  to  the  one  set  up  in  this  case,  was  made.  That  court 
there  said :  "  We  do  not  mean  that  a  chancellor,  in  exercising 
this  jurisdiction,  will  act  as  a  revising  court  over  the  records  of 
a  court  of  law  in  executing  their  process,  or  make  further  use 
of  errors  of  law  than  to  prove  or  disprove  the  fairness  or  unfair- 
ness of  the  sale.  We  will  treat  all  the  proceedings  at  law  as 
valid,  although  error  may  appear  therein,  and  will  relieve  against 
the  consequences  thereof,  because  the  rights  acquired  thereby 
can  not  be  retained  in  conscience ;  and  in  doing  so,  we  will  treat 
the  purchaser  as  a  trustee  of  the  estate,  and  Avill  not  compel  him 
to  surrender  it  until  equity  is  done  to  him."  To  the  same  point, 
Talbott  v.  Todd,  5  Dana,  193;  Moore  v.  Simpson,  5  Littell,  50. 

III. THE  ALLEGED  ESTOPPEL  BY  A  FORMER  ADJUDICATION. 

1.  To  constitute  estoppel,  the  subject-matter  and  the  parties 
must  be  the  same.  In  the  Fayette  Court,  Winslow  sought  a  sale 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  563 

of  the  road  to  pay  the  interest  on  the  mortgage  debt.  In  this 
case,  it  is  sought  to  charge  Bowler  as  a  trustee  by  reason  of  the 
circumstances  attending  his  purchase  at  the  sale  demanded  by 
Winslow,  and  that  did  not  take  place  until  the  sale;  "so  that 
there  is  nothing  prior  to  that  time  which  can  operate  as  an  es- 
toppel here,  for  the  rights  of  the  appellant  began  when  Bowler 
became  the  confirmed  purchaser  of  that  title." 

2.  Estoppels  are  not  favored  in  law;  and  can  not  be  eked 
out  by  inferences  or  presumptions  of  what  was  decided. 

A  judgment  on  matters  not  put  in  issue  is  not  binding,  5 
Dana,  193.  In  Marsh  v.  Eastern  E.  E.  Co.,  40  New  Hamp. 
567,  the  rule  is  stated  as  to  when  stockholders  are  proper  par- 
ties to  a  suit;  but  in  the  present  suit  the  stockholders  were  not 
admitted  as  parties  litigant.  "  The  question  of  fraud  in  Bowler's 
purchase  could  not  have  been  made  before  the  judgment  in  Fay- 
ette/'  says  the  Special  Judge,  Record,  page  68 ;  and  Judge 
GOODLOE,  in  refusing  to  allow  the  answer  of  Branham  and  other 
stockholders  to  be  filed  as  a  cross-petition,  refused  to  allow  the 
issue  to  be  made  in  the  case. 

Judge  Matthews  examined  the  claim  made  by  appellees' 
counsel,  that  Judge  GOODLOE  having  overruled  the  exceptions 
of  Branham  and  others  to  the  confirmation  of  the  sale,  because 
he  had  made  the  purchase  for  his  individual  benefit,  it  was  de- 
ciding that  Bowler  had  a  right  in  equity  as  against  the  corpora- 
tion, to  purchase  and  hold  the  property  for  his  own  use.  The 
judge  may  have  thought  that  Bowler  knew  he  could  not  purchase 
and  hold  in  his  individual  right,  being  a  director,  and  consider- 
ing that  he  did  make  the  purchase  as  trustee,  have  overruled 
the  exception  as  not  true.  But  there  was  evidence  in  the 
Record,  page  392j  if  it  was  admissible,  that  the  judge  held  that 
that  question  did  not  arise  in  the  case,  and  declined  to  meddle 
with  it. 

As  to  Bowler  being  admitted  as  a  bidder  by  the  Court,  Judge 
Matthews  claimed  that  "  the  doctrine  of  the  sanction  of  courts 
of  equity  to  sales  of  trust  property,  where  they  are  sought  to  be 
purchased,  or  have  been  purchased,  or  are  about  to  be  purchased 
by  a  person  occupying  a  fiduciary  relation  toward  that  property, 
does  not  apply  as  between  a  trustee  and  cestui  que  trust,  where 
both  parties  are  sui  juris.  The  court  of  equity  has  no  juris- 


564  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

diction,  as  between  parties  capable  of  authorizing  or  assenting  to 
the  sale,  saying  you  shall  or  §hall  not ;''  and  was  so  held  by  the 
great  equity  judge,  Lord  ELDON,  in  ex  parte  James,  8  Vesey, 
352. 

The  case  of  Bronson  v.  La  Crosse  E.  R.  Co.,  2  Wallace,  301, 
was  cited  as  deciding  that  the  appellant  was  not  barred  by  acts 
of  stockholders  similar  to  those  of  Branham  and  others.  In 
such  cases,  their  acts  bound  nobody  but  themselves,  because 
they  appear  only  for  themselves,  and  their  corporations  have  a 
separate  existence  and  powers. 

Mr.  Bowler,  being  a  director  of  the  corporation,  and  repre- 
senting it  in  the  foreclosure  suit,  Judge  Matthews  claimed  that 
it  was  a  presumption  of  the  law,  arising  from  the  relation  then 
existing  between  the  parties,  that  whatever  it  did  in  that  suit, 
or  omitted  to  do,  was  done  or  omitted  by  Mr.  Bowler;  and  this 
aside  from  any  evidence  as  to  his  acts  or  motives.  "In  the 
foreclosure  suit  in  Fayette  County,  the  corporation  was  present 
as  a  party,  but  was  chained ;  bound  hand  and  foot.  It  was  a 
captive  to  Bowler  by  operation  of  law;  it  could  not  open  its 
mouth,  or  lift  its  hand ;  it  could  not  object,  it  could  not  protest ; 
and,  consequently,  it  could  not  be  estopped.  Then,  where  is 
your  estoppel?  Let  Branham  be  estopped;  let  Desha  be  es- 
topped ;  let  every  stockholder  be  estopped ;  the  corporation  is 
not  estopped.  The  corporation  is  the  present  complainant.  It 
has  not  only  an  existence  distinct  from,  it  has  rights  and  titles 
above,  those  of  stockholders." 

Mr.  STANBERY  claimed,  that  inasmuch  as  the  appellant  al- 
leged actual  fraud  on  the  part  of  Bowler,  in  bringing  about  the 
sale  of  the  road,  the  action  of  the  court  in  overruling  the  excep- 
tions of  Branham  could  not  estop  the  appellant.  He  cited  the 
case  of  the  Packet  Company  v.  Sickles,  5  Wallace,  592,  to  show 
that  the  law  of  estoppel  did  not  apply  at  all  to  the  present  case, 
or  admit  of  the  construction  appellees  put  upon  the  overruling 
of  Branham's  exceptions. 

3.  It  was  denied  that  it  was  adjudicated  in  the  foreclosure 
suit,  that  the  company  was  insolvent  when  ordered  to  be  sold. 
It  was  merely  the  opinion  of  GOODLOE,  as  a  judge,  that  it  was  so, 
and  which,  in  his  opinion,  justified  him  in  ordering  the  road  to 
be  sold,  instead  of  placing  it  in  the  hands  of  a  Receiver.  And 


\ 
IN  THE  KENTUCKY  COURT  OF  APPEALS.  565 

this  belief  of  Judge  GOODLOE,  being  produced  by  Bowler,  and 
the  President  and  directors  under  his  influence,  was  a  fraud,  in 
violation  of  their  trust,  that  would  not  operate  as  an  estoppel, 
even  if  adjudged  by  the  court. 

4.  As  to  the  estoppel  of  appellant  against  any  equitable  claim 
to  limit  Bowler  to  the  cost  of  his  bonds  (by  reason  of  his  scheme 
to  depress  them,  buy  them  in,  and  thus  ward  off  any  opposition 
to  his  becoming  the  purchaser  of  the  road),  because  the  Fayette 
Court  ordered  them  to  be  paid,  principal  and  interest :  it  has  a 
double  aspect.  He  thus  gets  for  second  mortgage  bonds  which 
cost  him  forty-five  and  fifty  cents  on  the  dollar,  for  third  mort- 
gages which  cost  from  thirty  to  forty-five  cents,  and  for  the  in- 
comes which  he  bought  at  nominal  prices,  principal  and  interest! 
And  there  is  no  loss  to  Bowler,  but  an  immense  speculation, 
which  he  made  at  the  sacrifice  of  the  entire  property  of  his  ben- 
eficiary. But  the  court  did  not  order  the  payment  of  his  bonds 
that  were  not  reached  by  the  amount  of  his  bid ;  and  as  to  them, 
there  can  be  no  estoppel  to  prevent  a  court  of  equity  to  inquire 
if  they  were  not  purchased  for  an  illegal  purpose,  as  part  of  his 
scheme  to  obtain  the  property  of  his  beneficiary,  and  thus  a 
legal  claim  only  to  the  amount  of  their  cost  and  interest. 

IV. — LIMITATION  BY  TIME,  AND  BY  THE  OPERATION  OP  THE 

STATUTE. 

1.  Appellant's  counsel  claimed  that  the  time  within  which  it 
was  necessary  to  bring  the  suit,  was  fixed  by  the  statute ;  and 
that  in  this  respect  "  equity  followed  the  law ;"  and  no  earlier 
period  would  bar  in  equity  than  that  named  in  the  statute,  un- 
less it  amounted  to  an  estoppel  in  pais. 

No  Acquiescence  short  of  that  named  in  the  statute  will  con- 
stitute a  bar,  aas  it  is  merely  inaction,  and  is  the  very  thing 
which  the  statute  contemplates  as  creating  the  limitation  which 
cuts  off  the  right,"  Bower  v.  Earl,  18  Mich.  373.  To  the  same 
point  were  cited  Williams  v.  Chapion,  6  Ohio,  169.  "Acqui- 
escence, without  full  and  sufficient  knowledge  of  the  real  nature 
and  effect  of  the  instrument,  can  be  of  no  avail,''  Prideaux  v. 
Lonsdale,  11  Weekly  Law  Reporter,  531.  "A  cestui  que  trust 
discovering  a  breach  of  trust,  but  not  receiving  any  benefit  from 
it,  or  conniving  in  it  for  any  purpose,  and  not  recognizing  the 


566  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

transaction,  is  not  precluded  from  complaining  of  it  merely  on 
the  ground  that  he  abstained  from  making  the  complaint"  six 
years  after  he  knew  of  its  existence,  Gatty  v.  Phillipson,  27  Eng. 
Ch.  (7  Haire),  516.  In  Butler  v.  Carter,  5  Eng.  Ch.  Cases, 
276,  the  trustee  was  also  the  cestui  que  trust ;  and  although  for 
eight  years  he  acquiesced  in  a  loss  of  the  trust  estate,  he  after- 
ward held  the  representative  of  the  trust  estate  responsible,  and 
recovered  in  the  action. 

If  by  act  of  appellant,  Bowler  would  have  been  led  to  the  pur- 
chase, or  induced  to  part  with  his  money ;  or,  if  appellant  had  in 
any  way  led  him  to  do  some  act  by  which  it  would  afterward  be 
in  bad  faith  on  their  part  to  seek  the  recovery  of  the  road,  then 
it  would  have  been  a  binding  acquiescence,  or  such  an  estoppel 
as  would  have  barred  this  suit,  Davidson  v.  Barclay,  36  Penn. 
406 ;  Bankart  v.  Tenant,  10  Eq.  Cases  (L.  R.  S.>  145  j  Cokman 
v.  Eastern  Counties  JR.  R.  Co.,  4  Eng.  Railway  Cases,  513. 

Judge  WARDEN  made  the  following  points : 

(1.)  In  effect,  the  pretended  acquiescence  was  a  mere  failure 
to  exercise  at  once  the  option  of  a  cestui  que  trust  to  have  the 
benefit  of  a  purchase  at  judicial  sale  of  the  trust  property, 
Fleming  v.  Teran,  1 2  Geo.  394 ;  Pindler  v.  Atkinson,  3  Md. 
410;  Eidout  v.  Einggold,  7  Gill  &  Johns.  1  ;  Bell  v.  Webb  & 
Mong,  2  Gill,  170;  Mong  v.  Bell,  7  Gill,  244;  Freeman  v.  Star- 
ivood,  49  Maine,  195  ;  Morris  v.  West,  1  West  Va.  256. 

(2.)  These  cases  and  elementary  considerations  are  to  the 
effect,  that,  though  a  trustee  may  purchase  at  judicial  sale,  not 
brought  about  by  him,  and  may,  upon  the  subsequent  taking  of 
the  property  by  the  cestui  que  trust,  be  entitled  to  reimburse- 
ment for  the  purchase,  he  can  not  deprive  the  cestui  que  trust 
of  the  benefit  arising  from  the  purchase.  It  follows,  that  if  there 
was  a  benefit  from  the  Bowler  purchase,  he  and  his  associates 
in  the  directory  ought  to  have  claimed  that  benefit  for  the  cor- 
poration, and  if  they  pretended  to  refer  the  question  thereupon 
arising  to  the  stockholders,  the  authorities  elsewhere  cited  show, 
that  the  stockholders  should  have  been  perfectly  informed  of  all 
matter,  whether  of  law  or  fact,  which  might  properly  affect  tlieir 
determination,  Hoffman  Coal  Co.  v.  Cumberland  Co.,  ante,  97; 
Lewin  on  Trusts,  615. 

(3.)  On  account  of  the  failure  to  comply  with  this  requirement 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  567 

of  the  law,  Bowler  could  have  no  benefit  of  the  pretended  ac- 
quiescence, Gowland  v.  DeFaria,  17  Ves.  25. 

(4.)  Binding  acquiescence  is  in  the  nature  of  estoppel  in  pais. 
Pearce  v.  Madison  &  2nd.  R.  R.  Co.,  21  How.  441 ;  Goodin  v. 
Evans,  18  Ohio  St.  166  ;  Hoffman  Steam  Coal  Co.  v.  Cumberland 
Coal  &  Iron  Co.,  16  Md.  457;  ZabrisJcie  v.  Cleveland,  Columbus 
&  Cincinnati  Railway,  23  How.  381 ;  Sparlcs  v.  Shropshire,  4 
W.  P.  Bush,  552. 

(5.)  We  admit  that  u  the  community  at  large  must  form  their 
judgment  of  the  conduct  of  a  corporation  from,  an  external  posi- 
tion " — see  Zabriskie  v.  C.  C.  &  C.  Railway,  supra — but  we  deny 
that  Bowler's  relation  to  this  company  was  that  of  the  community 
at  large.  As  to  him,  the  alleged  acquiescence  could  not  have 
the  effect  of  estoppel  in  pais.  He  can  not  be  allowed  to  allege 
his  own  acquiescence  in  his  own  abuse  of  trust.  He  can  not  be 
allowed  to  allege  an  acquiescence  on  the  part  of  his  co-directors 
to  which  his  own  acquiescence  contributed,  and  which  his  own 
undue  influence  in  effect  produced.  It  will  charge  him  with  the 
whole  responsibility  for  such  pretended  acquiescence,  and  will 
therefore  pronounce  the  acquiescence  void  ab  initio,  as  to  him. 

(6.)  Even  if  the  case  were,  that  all  of  the  other  directors  had 
conspired  with  Bowler  to  betray  the  corporation,  equity  would 
not  deny  the  remedy  sought  in  this  proceeding.  In  that  case, 
to  allow  one  of  the  directors  to  take  the  benefit  of  the  wrong  in 
which  he  had  participated,  simply  because  his  co-trustees  had 
been  participes  fraudis  with  him,  would  be  a  violation  of  the  rule, 
that  no  man  shall  have  advantage  of  his  own  wrong,  and  would 
be  forbidden  by  every  just  consideration  of  public  policy. 

(7.)  Should  the  decision  of  this  case  allow  to  Bowler's  estate 
the  benefit  of  the  pretended  acquiescence,  a  most  valuable  oppor- 
tunity to  advance  at  once  the  material  interests  and  the  moral 
interests  of  the  business  community,  would  be  thrown  away.  In 
that  case,  men  would  still  be  encouraged  to  engage  in  railroading, 
not  with  public  objects,  but  with  objects  such  as  those  of  Bowler, 
which,  according  to  his  own  account,  were  not  such  objects  as  a 
trustee  is  obliged  to  have  in  the  performance  of  his  trust. 

2.  The  offer  to  restore  the  road  to  appellant,  and  their  alleged 
election  to  allow  Bowler  to  keep  it. — It  purports  to  be  an  offer  to 
return  the  road  at  what  it  " cost'7  Bowler.  That  implies  what 


568  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

counsel  say  it  meant,  to  give  the  stockholders  (by  which  ap- 
pellant is  meant)  the  benefit  of  Bowler's  sharp  bargains.  To 
what  it  cost  him  should  be  added,  of  course,  all  he  paid  from  his 
own  means,  after  the  purchase ;  and  that  he  did  not  pay  much  is 
seen  from  Mr.  Dudley's  deposition,  showing  that  he  received 
from  the  road  almost  as  much  as  he  paid  out,  even  aside  from 
his  borrowings  from  the  fund  in  Dudley's  hands.  The  cost  in- 
cludes all  Bowler's  investments  in  the  road.  Mr.  Walker  esti- 
mated the  entire  cost  at  $483,000,  and  that,  with  interest,  or 
something  like  that  sum,  would  be  the  basis  upon  which  to 
arrive  at  the  amount  for  which  the  road  should  be  surrendered. 
But  that  was  not  his  proposition,  for  after  showing  $797,335, 
not  covered  by  the  sale,  he  adds :  whatever  "  these  securities 
actually  cost  me,  with  interest,  must  be  paid,  in  addition  to  the 
$2,125,000,  the  road  brought."  So  it  appears  that  HE  was  to 
have  all  the  benefit  of  his  sharp  bargains  in  buying  second 
mortgages  at  forty- five  cents,  thirds  at  twenty -five  cents,  and 
preferred  incomes  at  thirty-five  cents  on  the  dollar,  instead  of 
the  appellant !  This  was  to  be  his  compensation  for  the  sharp 
operation  of  bringing  the  road  to  sale,  and  securing  the  purchase. 
In  the  case  cited,  and  herein  reported,  page  418,  the  court  found 
the  proposition  to  return  to  be  entirely  €air.  That  Bowler  re- 
quired a  bonus,  is  shown  by  appellees'  own  witness,  Mr.  Dudley, 
to  whom  he  offered  the  road  for  $450,000  and  his  bid.  He  asked 
the  committee  who  called  upon  him,  $500,000  for  his  bargain. 
The  refusal  of  the  appellant  to  run  after  such  a  proposition  (for 
it  was  never  properly  made  to  the  company)  can  not  certainly 
be  claimed  to  be  an  election  to  allow  Bowler  to  keep  the  road. 
When  he  was  properly  applied  to,  he  insults  part,  and  endeavored 
to  bribe  the  third  member  of  the  committee. 

3.  As  to  the  Statute  of  Limitations. — Mr.  Myers  claimed  that 
previous  to  the  Revised  Statutes  of  1852,  there  was  no  provision 
limiting  the  class  of  cases  now  known  as  sui*  for  relief  on  the 
ground  of  fraud.  Mr.  Johnson,  in  his  brief,  page  51,  says  the 
"action  on  the  case"  was  the  remedy  in  such  suits  previous  to 
that  time. 

As  heretofore,  appellant's  counsel  claimed  that  this  suit  was 
an  original  action ;  and  as  it  does  not  seek  the  remedies  indi- 
cated by  defendants'  counsel,  the  provisions  of  the  Code  referred 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  569 

to  by  them,  do  not  apply.  Blight's  Heirs  v.  Tobin,  7  Mon. 
612,  was  referred  to  as  settling  appellees'  claim  that  this  action 
was  barred  in  three  years.  Therein  the  Court  of  Appeals  "  de- 
cided that  the  statutory  limitation  to  a  motion  to  quash  a  sheriff's 
sale  for  fraud  should  not  be  adopted,  by  analogy,  as  a  bar  to  a 
bill  in  chancery  for  the  same  purpose."  And  HowelPs  Heirs  v. 
M'Crary,  1  Dana,  388,  was  quoted  as  follows:  "As  this  suit  is 
brought,  not  for  damages  for  fraud,  but  for  a  cancelment- of  the 
deed  and  a  restitution  of  the  land,  it  is  virtually  a  proceeding 
in  rem  ;  and  a  prayer  for  a  cancelment  of  the  sheriff's  deed  is 
only  subsidiary  to  the  chief  end  of  obtaining  the  land  itself. 
Such  a  suit  in  equity  should  not  be  barred  by  adopting  the  legal 
limitation  to  an  action  for  fraud,  which  confirms  the  contract. 
The  only  suitable  analogy  is  an  action  for  the  land  founded  on  a 
right  of  entry,  which  would  not,  as  we  think,  be  barred  by  a 
shorter  limitation  than  that  of  twenty  years,  even  though  the 
defending  party  should  rely  on  a  fraudulent  deed  more  than  five 
years  old.  As  long  as  the  action  itself  is  not  barred  by  time, 
the  right  to  prove  any  fact  material  to  the  maintenance  of  it, 
should  not,  in  our  opinion,  be  barred  by  any  statutory  or  pre- 
scriptive limitation.  We  have  not  seen  a  case  in  which  a  suit 
in  chancery,  to  recover  land  and  set  aside  a  fraudulent  deed  in 
subservience  to  that  end,  was  ever  barred  by  the  lapse  of  five 
years,  or  by  less  than  what  would  bar  a  suit  for  the  land 
founded  on  any  other  equity ;  and  we  can  perceive  no  reason  or 
analogy  which  should  prescribe  any  other  limitation  in  the  one 
case  than  the  other.  In  each  the  object  is  the  same,  to  wit:  the 
land,  or  the  security  of  the  title  thereto ;  and  therefore,  in  each, 
the  limitation  should  be  the  same." 

Numerous  cases  were  cited  of  suits  in  chancery  for  the  re- 
covery of  real  estate,  wherein  the  statutory  limitation  in  regard 
to  suits  at  law  for  the  same  purpose,  were  held  to  govern,  Find- 
ley  v.  Langford,  1  Marsh.  364 ;  Crane  v.  Prather,  4  J.  J.  Marsh. 
77  ;  Severns  v.  Hill,  3  Bibb,  240 ;  Ogden  v.  Walker's  Heirs,  6 
Dana,  421  ;  Patrick's  Heirs  v.  Chenault,  6  B.  Mon.  321 ;  Baler 
v.  Whiting,  3  Sumner,  485  j  Oliver  v.  Piatt,  3  How.  333 ;  Chal- 
mondely  v.  Clinton,  2  Jac.  &  Wai.  139;  Michaud  v.  Girod,  4 
How.  561  ;  Butler  v.  Haskell,  4  Dessaus.  S.  C.  702 ;  Kane  county 
v.  Harrington,  50  Illinois,  232  j  WaUett  v.  Collins,  10  How.  186} 


570  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

Leeds  v.  Amherst,  22  English  Ch.  (2  Phillips),  116;  Lord  v. 
Jejfkins,  35  Beavan,  7. 

Numerous  cases  were  also  cited  wherein  the  suits  were  con- 
cerning personal  property,  and  the  statutes  of  limitation  were 
followed  by  analogy:  "Where  a  party  claims  to  hold  another  a 
trustee  of  personal  property  under  a  constructive  trust,  he  must 
assert  the  claim  within  six  years  from  the  time  the  trust  is  al- 
leged to  have  originated,  in  analogy  to  the  Statute  of  Limitations)" 
Ashhursfs  Appeal,  60  Penn.  290.  ' 

4.  Necessary  parties  as  defendants. — Story's  Equity  PL,  sec. 
207,  p.  236,  lays  down  the  general  rule  and  the  principles  of  it 
as  follows  :  u  That  in  suits  respecting  the  trust  property,  brought 
either  by  or  against  the  trustees,  the  cestuis  que  trust  (or  bene- 
ficiaries), as  well  as  the  trustees,  are  necessary  parties.  And 
where  the  suit  is  by  or  against  the  cestuis  que  trust  (or  bene- 
ficiaries), the  trustees  are  also  necessary  parties.  The  trustees 
have  the  legal  interest,  and  therefore  they  are  necessary  parties. 
The  cestuis  que  trust  (or  beneficiaries)  have  the  equitable  and 
ultimate  interest  to  be  affected  by  the  decree,  and  therefore  they 
are  necessary  parties."  "  The  beneficiaries  are,  emphatically, 
the  direct  parties  in  interest."  Vorhees  v.  Baxter,  1  Abbott,  45, 
was  cited  as  a  decision  on  the  118th  section  of  the  New  York 
Code,  which  is  the  same  as  the  35th  section  of  the  Kentucky 
Code.  Mr.  Stanbery  said  that  the  conveyance  to  Ernst  and 
Keith  "  was  a  dry,  naked  trust  to  hold  the  title  of  the  road.  It 
was  not  transferred  to  the  -possession  of  the  trustees  to  hold. 
They  had  no  duty  to  perform,  no  land  to  use,  no  property  to  take 
charge  of,  improve,  and  protect.  Not  at  all.  That  was  not 
their  business.  The  possession  of  the  road  was  retained  by  the 
beneficiaries  under  that  trust.  Will  the  gentlemen  tell  me  that, 
with  fraud  charged  against  Bowler,  we  could  sue  these  naked 
owners  of  the  legal  title,  and  omit  to  sue  Bowler's  administrators 
and  his  heirs?" 

V. — As  TO  THE  DEFENSE  ON  THE  MERITS  OF  THE  CASE. 

1.  Insolvency  of  the  Company. — With  the  small  deficits  figured 
out  by  Mr.  Johnson,  the  solvency  of  the  road  may  well  be  as- 
sumed as  a  matter  of  fact.  Besides,  its  prospects  gave  it  value. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  571 

All  agree  that  the  business  and  earnings  were  steadily  increasing, 
as  this  table  abundantly  proves: 


EARNINGS  OF  THE  ROAD. 

Tear. 

Earnings. 

Current  Expenses. 

Net  Earning*. 

1854, 

$87,964  38 

$68,203  84  —  55  per  cent  of  earnings, 

.    $37,203  84 

1855, 

1856, 

264,973  66 
399,948  12 

126,279  55—  52A       «                "          . 
(219,971  76—  estimated  at  55  per  cent 

138,694  11 
.     179,976  66) 

1857, 

426,408  36 

221,105  87     .... 

205  302  49 

1858, 

437,579  02 

239,262  22         .        .        .'•'.  =  .•• 

1859* 

458,820  99 

231,086  22     . 

227.734  77 

•  In  1859,  the  earnings  for  only  11  months  and  5  days.  "R987  228   P7 

But  what  relevancy  has  this  question  to  the  case?  And  if 
actually  insolvent,  it  was  produced  by  Bowler  and  his  Board. 
The  appellant  paid  the  directors'  debt  to  the  amount  of  $71,- 
328.33;  and  at  the  same  terms  upon  which  the  third  mortgage 
bonds  were  sold  to  Walker,  the  company  was  entitled  to  a  rebate 
of  twice  that  amount,  to  wit:  $142,656.66.  There  should  have 
been  that  amount  less  of  third  mortgage  bonds  ;  and  that  alone 
would  show  solvency.  Bowler  was  present  at  the  meeting  when 
this  was  ordered,  makes  no  objection,  and  did  actually  concur 
therein.  He  is,  therefore,  responsible.  In  passing,  is  not  this  a 
noticeable  point  in  the  management  of  the  company  by  Mr. 
Bowler?  As  the  "Proposition  to  Bondholders"  says  $100,000 
of  the  third  mortgages  were  in  the  control  of  the  Board  when 
they  paid  the  debt  for  which  the  bonds  were  given,  how  came 
these  bonds  into  Mr.  Bowler's  hands  ?  And  poor  as  this  appel- 
lant then  was,  it  loaned  the  millionaire,  Bowler,  $11,000! 

2.  This  part  of  the  case  involves  Mr.  Bowler's  acts  in  the 
management  of  his  trust,  and  gives  it  the  character  of  a  narra- 
tive of  his  personal  transactions  as  a  director  and  manager  of 
the  company.  It  embraces  the  charge  of  fraud  against  him, 
and  was  so  considered  by  Mr.  Stanbery,  who  said  :  "I  shall 
try  Bowler  by  his  conduct.  I  desire  to  try  him  by  no  other 
standard  than  that.  I  shall  try  him  by  his  declarations  and  by 
his  acts.  Whatever  they  make  out,  whatever  they  produce,  it 
is  not  I  that  produce  them  ;  it  is  Bowler  himself.  It  is  an  un- 
pleasant task  for  me,  when  this  duty  is  in  reference  to  a  man 
who  has  passed  away,  whom  1  knew,  and  when  those  who  sur- 
vive him  are  persons  whom  I  greatly  respect  ;  but  it  is  a  duty 
which  can  not  be  laid  aside."  Mr.  S.  proceeded  upon  the  same 
point:  "Now,  what  are  the  charges  of  fraud?  They  are,  that 


572  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

being  our  director  and  trustee,  he  commenced  arrangements  to 
possess  himself  of  our  property.  That  he  did  this  by  constantly 
vilifying  our  credit ;  by  saying  to  the  holders  of  our  securities, 
'  They  are  worthless,'  and  buying  them  up  at  the  same  time ; 
by  alarming  parties  that  could  injure  us,  the  holders  of  mort- 
gage liens,  and  inducing  them  to  commence  operations  against 
us  when  we  were  unprepared ;  by  wasting,  and  assisting  to 
waste,  our  means  by  which  we  could  defend  ourselves  against 
the  suit  of  Winslow;  by  entering  into  schemes  and  conspira- 
cies ;  by  combining  with  parties  to  purchase  our  road,  he  him- 
self being  a  director  of  the  road,  it  being  his  duty  to  defend  us 
against  that  sale,  and  delay  it  as  far  as  possible;  by  preparing 
himself — long  before  the  decree,  before  it  was  said  the  road 
should  be  sold — to  be  the  purchaser ;  by  corrupting  his  co-trus- 
tees, and  inducing  them  to  follow  out  his  plans  and  assisting  him 
in  getting  our  road."  Upon  the  point  of  trusteeship,  Mr.  Stan- 
bery  said:  "At  last  the  gentlemen  acknowledge  that  he  was  a 
trustee.  But  their  ideas  of  his  trusteeship  are  curious.  His 
relation  to  the  stockholders,  according  to  Mr.  Benton,  is  the  re- 
lation I  would  bear  to  that  gentleman  if  he  loaned  me  his  pen- 
knife, inasmuch  as  I  would  then  be  trustee  of  his  property. 
The  parallel  would  come  much  nearer  this  case  if,  with  his  pen- 
knife I  had  cut  his  throat.  They  say  he  became  a  director 
unwillingly ;  that  he  was  solicited  once,  twice,  three  times. 
Richard  was  offered  the  crown,  but  he  did  not  want  it  j  he  takes 
it,  however.5' 

Mr.  FISK  said:  "Appellees  argue  that  Bowler  was  compelled 
to  buy  the  road  to  save  himself  from  loss.  The  emptiness  of 
this  plea  is  shown  when  we  consider  the  chicanery,  cunning, 
and  craft  he  used  in  the  obtention  of  the  securities.  Having 
by  these  means  become  possessed  of  these  securities — thirds  and 
incomes — they  say  he  was  justified  in  bidding  in  the  road,  to 
save  himself  from  loss.  The  proof  shows  that  he  was  the  chief 
agitator ;  the  one  malignant  malcontent  whose  burning  cupidity 
could  not  be  quenched  until  he  had  managed  the  finances,  to 
make  the  saving  of  the  road  (upon  his  showing)  appear  impos- 
sible ;  and  then,  the  ripe  pear  fell  into  his  rapacious  maw.  To 
save  himself?  No!  That  is  not  the  phrase.  To  enrich  him- 
self upon  the  ruin  of  all  other  interests  trusted  to  his  unfaithful 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  573 

keeping,  is  the  equitable  translation  of  all  his  well-simulated 
alarms.  Let  him  and  his  now  come  in  and  do  equity,  and  receive 
justice." 

These  charges  will  be  the  better  understood  by  briefly  re- 
ferring to  some  of  the'  specific  acts  relied  upon  by  the  appel- 
lant's counsel,  presented  by  brief  and  in  oral  argument. 

(1.)  Before  Mr.  Bowler  became  a  director,  his  relations  to  the 
company  consisted  in  his  buying  its  stock  and  bonds,  and  in- 
dorsing for  the  company,  for  which  he  was  paid  "  liberally." 
He  was  not  a  broker,  or  "  Third-street  sharper,"  like  Mowry, 
Keys,  or  Vallette,  but  a  merchant.  Neither  was  he  an  original 
subscriber  to  the  stock  of  the  company.  He  solicited  votes  to 
become  a  director. 

(2.)  Being  esteemed  by  the  community  "a  man  of  wonderful 
energy  of  character  and  activity,  of  large  means  and  great  re- 
sources, and  with  few  equals  as  a  financier,"  as  Mr.  Benton  says, 
he  at  once  became  "  the  leading  man  in  the  company,"  and 
"was  always  to  be  consulted  before  any  important  action  was 
to  be  taken.''  No  value  could  be  given  to  the  third  mortgage 
bonds  "without  the  co-operation  of  Mr.  Bowler,''  and  he  "exer- 
cised a  controlling  influence  over  the  affairs  of  the  road."  In 
fine,  he  became  the  president  and  directors  in  one :  the  "  Rail- 
road King."  Whatever  of  importance  was  done  after  that,  was 
done  by  Mr.  Bowler. 

(3.)  His  very  first  act,  on  the  second  day  of  his  election,  was 
to  have  himself  appointed  on  a  committee  to  confer  with  the 
holders  of  third  mortgage  bonds,  in  which  he  was  greatly  inter- 
ested. This  position  of  intermediary  he  always  retained,  where 
he  could  represent  the  bonds  as  worthless  and  the  company  as 
bankrupt,  which  he  at  all  times  took  great  care  to  do,  until  he 
had  accomplished  his  purpose  in  becoming  the  purchaser  of 
the  road. 

(4.)  As  early  as  May  13,  1858,  he  moved  for  a  better  depot  at 
Covington ;  and  ever  after,  until  the  sale,  it  and  other  forced 
needs  were  made  the  pretext  for  the  non-payment  of  the  interest 
on  the  second  mortgage  bonds.  But  to  this  day,  the  cars  stop 
in  the  streets  of  Covington,  as  ever  before  ;  and  a  rented  waiting- 
room  adjoining  the  refreshments  has,  ever  since  that  event,  an- 
swered the  purposes  of  the  $20,000  depot :  so  urgently  needed  in 


574  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

1858  and  1859,  as  to  require  the  sacrifice  of  all  interest  of  the 
stockholders  in  the  entire  road. 

(5.)  At  the  same  meeting,  a  committee,  headed  by  the  Presi- 
dent, reported  in  favor  of  paying  Mr.  Bowler  and  the  other  hold- 
ers of  third  mortgage  bonds,  their  interest ;  but  he  was  not  ready. 
He  was  on  a  committee  "  to  report  a  plan  of  operations  to  the 
bondholders;"  and,  on  the  19th  of  June,  1858,  he  was  ready 
with  the  "  $800,000  circular."  It  gave  him  his  interest !  He 
wanted  that ;  he  wanted  to  buy  bonds ;  and  above  all,  he  wanted 
the  road !  And  this  financial  measure  is  paraded  by  counsel  as 
evidence  of  Bowler's  good  faith  ! 

SOME  FEATURES  OF  THE  800,000  CIRCULAR. — (1.)  Only  nine 
days  before  its  adoption,  a  committee  reported  that  the  road  was 
unable  to  pay  the  interest  on  the  third  mortgage  bonds,  and 
showed  that  $145,600  was  needed  for  the  road.  When  it  was 
adopted,  these  needs  had  increased  to  $800,000,  and  the  in- 
terest was  paid !  Was  there  any  other  reason  for  its  payment 
than  Bowler's  claim  to  the  major  part  of  it;  and  to  cause  the 
second  mortgage  bondholders  to  sue,  and  bring  the  road  to  sale  ? 

(2.)  In  it,  the  third  mortgage  bonds  are  given  as  $498,000, 
with  the  explanation  that  "$100,000  may  be  considered  under 
the  control  of  the  company."  Why  under  the  control  of  the 
company  ?  Because,  by  the  Walker  contract  they  were  left  on 
deposit  as  part  security  for  the  payment  of  the  "  old  bank 
debt  of  the  company."  The  company  paid  it  to  the  extent  of 
$71,328.33,  but  Bowler  got  Walker's  bonds!  How  is  that  ex- 
plained ?  Is  not  that  willful  waste  of  the  means  of  the  company 
in  its  very  hour  of  need  ?  Would  Mr.  Benton,  or  Mr.  Johnson, 
or  Mr.  Bowler  have  so  managed  their  private  business  ? 

(3.)  Mr.  Johnson  says  it  was  unanimously  adopted.  Three 
members  of  the  Board  were  absent ;  and  it  does  not  appear,  from 
the  minutes,  to  have  been  adopted  at  all!  Mr.  Levis  had  a 
called  meeting ;  the  committee  reported ;  and  thereupon  it  was 
acted  upon  as  having  been  adopted. 

(4.)  It  is  urged  that  the  "  Proposition  to  Bondholders"  pre- 
sented the  only  feasible  plan  for  preserving  the  road.  Preserve 
it  for  whom  ?  Certainly  not  for  the  company ;  for  Mr.  Clement 
had  already  furnished  the  safe  and  practical  plan.  But  that  was 
not  enough  to  scare  the  bond  and  stockholders ;  nor  enough  to 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  575 

justify  a  suspension  of  interest,  "bear"  the  bonds,  and  bring  on 
a  sale  of  the  road.  Does  a  prudent  man,  who  wishes  the  aid  of 
his  creditors,  magnify  his  needs  ?  If  the  "  preservation  "  of  the 
road  was  desired,  why  was  not  Gest's  proposition  to  lease  accepted! 

3.  Approval  by  acts  of  the  stockholders. — As  an  instance,  and 
to  illustrate   all  similar  pretended  "  approvals,3'  it  was  denied 
that    the   stockholders,    at    their   annual    meeting  in    1858,   in 
"  adopting"    and    ordering   the    annual  report    to   be    printed, 
"sanctioned  and  approved"  the  "$800,000   circular."     That, 
under  the  circumstances,  was  merely  adopting  it  as  the  annual 
report ;  and,  inasmuch  as  there  was  no  hint  toward  a  sale  of  the 
road,  and   little  else  in  the  report  than  fair  promises   for  the 
future,  and  protestations  of  honesty  and  integrity  on  behalf  of 
the  directors,  it  can  not  be  claimed  to  be  an  approval,  and  con- 
sequently an  estoppel  of  the  appellant  from  alleging,  on  discov- 
ering its  real  object,  the  issuing  of  the  circular  as  one  link  in  a 
concurrent  chain  of  circumstances  plainly  pointing  to  Bowler's 
intention  to   bring  the  road  to  sale.     The  issue  of  approval  or 
disapproval  was  never  raised  until  the  annual  meeting  after  the 
sale,  in  1859,  and  then  it  was  disapproved,  against  all  the  wiles 
and  threats  of  Bowler,  Benton,  and  their  friends. 

4.  The  pretended  defense  in  the  foreclosure  suit. — (1.)  It  is 
claimed  to  have  been  real.     If  so,  why  did  not  the  directors  pay 
into  court  the  net  earnings,  as  they  promised  to  do  in  their  an- 
swer, instead  of  diverting  them  to  pay  the  directors'  debt  ?     The 
contract  to  pay  it  had  been  negotiated  by  Benton,  and  approved 
by  the  Board ;  and  there  was  full  security  for  its  performance. 
It  ivas  performed  !     Why  should  the  means  of  the  company  be 
diverted,  to  repay  what  had   already  been   provided  and  paid, 
except  to  precipitate  the  sale?     The  directors  had  no  right  to 
prefer  this  debt,  even  if  it  had  not  been  paid  by  the  Walkers, 
because  they  were  indorsers,  Drury  v.  Cross,  7  Wallace,  299. 

(2.)  From  the  16th  day  of  June  to  30th  September  1859, 
$73,056.36  was  paid  by  the  company  to  "  Levis,  Benton,  and 
Casey,  Trustees,"  for  the  directors'  debt.  (See  Exhibit  B, 
Record,  page  254.)  In  confirmation,  see  Record,  page  115, 
Exhibit  D,  to  George  M.  Clark's  deposition,  in  which  is  shown 
this  item  of  "disbursements"  by  the  company  :  "For  old  bank 
debt  of  the  company,  $71,328.33." 


576  COV.  &  LEX,  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

(3.)  The  same  Exhibit  D,  Record,  page  115:  "For  current 
running  expenses,  including  balance  due  November  1,  1858, 
$253,844.84."  This  left  (see  Exhibit  C,  same  page  of  Record) 
a  lt  balance,  being  net  earnings  for  eleven  months  and  five  days, 
$227,734.77 !"  Could  not  this  $70,000  interest,  and  by  1st  Sep- 
tember, 1859,  swollen  to  $105,000,  have  been  paid  from  this 
"net  earnings,"  if  Bowler,  the  manager,  had  so  willed? 

(4.)  See  Exhibit  B,  to  E.  B.  Clark's  deposition  (Record,  page 
255),  by  which  it  appears  that  these  same  trustees,  Levis,  Ben- 
ton,  and  Casey,  had,  and  STILL  HAVE,  from  all  that  appears,  a 
balance  of  $46,500.33  of  the  moneys  of  the  company  in  their 
hands.  If  they  have  not  this  balance,  which  is  charged  to  u  profit 
and  loss,"  they  have  not  shown  where  it  is.  Surely,  these  ap- 
pellees, with  the  appellant's  books  in  their  hands,  could  have 
shown  where  the  money  went,  if  it  had  gone  to.  any  honest 
purpose. 

5.  Why  ivould  not  the  payment  into  Court  have  prevented  a 
sale  of  the  Road  f — Mr.  Johnson  says  it  would  probably  have 
been  done  if  that  had  defeated  the  suit  or  produced  any  "  valu- 
able delay."     If  Mr.  Bowler  had  not  urged  a  sale,  who  else  was 
there  to  do  so  ?     All  the  other  parties  were  asking  a  Receiver, 
and  were  opposing  a  sale.     This  is  admitted  by  appellees.     The 
case  was  simply  this :  Winslow  was  asking  for  his  interest ;  and 
Bowler  was  urging  a  sale,  and  opposed  to  a  Receiver !     He  said 
so  to  Vallette,  and  he  swore  to  it  besides. 

In  notes  to  Mr.  Johnson's  brief,  it  is  claimed  that  the  judg- 
ment for  sale  released  Bowler  from  any  further  responsibility  as 
a  director  and  trustee  !  It  had  just  the  reverse  effect.  It  made  it 
more  urgent  on  him  to  preserve  the  road.  Just  as  the  troubles 
and  embarrassments  increased,  his  duty  to  use  every  effort  in 
behalf  of  his  trust  became  more  urgent.  To  claim  that  the  Fay- 
ette  Court,  by  a  judgment  of  sale,  could  release  Bowler  from  his 
obligations  as  trustee,  is  worse  than  absurd, — it  is  an  argument 
for  the  toleration  of  dishonesty ! 

6.  Holder's  right  to  purchase  the  securities  of  the  Company 
while  director. — When  Bowler  found  that  his  duty  as  a  director 
conflicted  with  his  individual  interest,  it  was  his  duty  to  resign 
his    directorship,    Goodin    v.  Whitewater    Canal   Co.,  18   Ohio 
St.   169.      Remaining  director,  after  such  discovery,  does  not 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  577 

authorize  him  to  pursue  his  individual  interest  at  the  sacrifice 
of  his  trust.  Therefore  he  could  not  use  the  information  he  ob- 
tained as  director  to  speculate  in  the  securities,  by  "  bearing " 
them,  and  thus  injure  the  credit  of  the  company,  and  cause  the 
creditors  to  be  more  strenuous.  He  had  no  right  thus  to  pre- 
pare himself  to  be  the  purchaser  by  buying  off  all  opposition, 
and  standing  the  unopposed  bidder  at  the  sale,  Drury  v.  Cross, 
7  Wallace,  299.  Directors,  in  the  cases  instanced  by  counsel 
for  appellees,  invested  in  the  securities  of  their  roads  for  the 
purpose  of  aiding  them ;  and  not  to  gain  undue  advantages  for 
the  purpose  of  investing  themselves  with  the  road  itself,  or  to  be- 
come the  owner  of  the  trust  property.  And  whatever  may  have 
been  Bowler's  original  purposes,  if  these  purposes  finally  assumed 
the  object  of  buying  the  road,  after  that,  such  acts  became 
breaches  of  trust,  and  he  can  take  no  advantage  therefrom. 

7.  Mr.  Bowler's  speculation  in  purchasing  the  Road. — This 
is  denied  by  appellees'  counsel,  and,  as  evidence  of  it,  they  refer 
to  his  sale  to  Stevenson,  Keith,  and  others ;  but  carefully  omit 
any  reference  to  Mr.  Levis's  deposition,  where  he  explains  the 
contract.  It  appears,  in  these  transactions,  two  sets  of  papers 
were  executed :  one  for  the  public,  to  be  recorded,  and  the  other 
for  the  private  use  of  the  parties ;  and  Mr.  Levis  says,  when  he 
retired  from  the  road  his  contract  of  the  latter  character  was 
destroyed.  In  his  second  deposition,  Record,  page  342,  he 
explains  the  terms  of  the  contract  of  sale  to  these  gentlemen. 
It  was  similar  to  the  one  made  with  himself,  Gedge,  and  others, 
previously  ;  or  rather,  Mr.  Levis  retired,  and  the  number  of  joint 
owners  was  increased.  "  Mr.  Bowler  made  a  stock  for  the  road 
amounting -to  $1,100,000,  subject  to  the  mortgage  debt."  This 
was  $1,737,000,  and  adding  the  stock,  made  the  sale  price,  as 
to  the  original  company,  $2,837,000.  This  stock  he  offered  "to 
the  purchasers  at  fifty  cents  on  the  dollar,  but  how  much  they 
decided  on  I  never  knew."  It  appears  from  the  recorded  papers 
that  Mr.  Bowler  received  from  his  new  partners  SI  10,000.  If  that 
represents  the  interest  conveyed,  and  Mr.  Bowler  received  only 
fifty  cents  on  the  dollar  of  that  amount,  he  still  held  $945,000  of 
the  stock.  If  it  represents  the  true  amount  received,  and  fifty 
per  cent  more  was  added,  then  he  still  retained  $880,000  of  the 
stock.  The  loss  is  not  apparent.  Besides,  where  gentlemen 

37 


578  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

keep  two  sets  of  papers,  if  they  do  not  explain  the  true  meaning, 
the  inference  is,  that  if  shown,  they  would  be  unfavorable  to  the 
party  having  the  power  so  to  do.  So  the  whole  matter  is,  that 
in  the  stock  made  of  $1,100,000,  Mr.  Bowler  sold  $110,000 
thereof  at  fifty  cents  on  the  dollar,  and  that  was  all  his  loss. 
But  what  did  he  give  for  his  $1,100,000  of  stock?  • 

8.  Peculiarities  in  the  defense. — Messrs.  Benton,  Levis,  and 
Bowler,  previous  to  the  sale,  were  loud  and  eloquent  in  the  praises 
of  the  road.  In  general  terms,  it  was  "a  great  institution!" 
But  when  it  was  sold,  it  was  not  worth  an  exception  to  the  confir- 
mation, or  a  prayer  for  an  appeal !  After  that,  it  was  unbal- 
lasted, it  needed  new  iron,  its  right  of  way  was  not  paid  for, 
the  bridges  were  rotten,  etc.  The  stockholders,  in  the  first 
place,  believed  what  Messrs.  Benton,  Levis,  and  Bowler  said 
about  the  great  value  of  their  property,  and  re-elected  them 
their  officers.  They  thought  their  President  and  directors  were 
honest  men,  and  were  telling  the  truth  when  they  spoke  thus 
of  the  value  of  the  road,  its  great  prospects,  and  that  they  were 
managing  every  thing  for  the  best.  Are  they  to  be  blamed  for 
reposing  generous  confidence  in  these  gentlemen  ?  If  they  are, 
then  we  must  now  allow  them  to  have  been  getting  the  money 
of  the  stockholders  and  bondholders  under  false  pretenses.  But 
appellant's  counsel  would  save  those  gentlemen's  reputation  from 
such  hari  kari.  Mr.  Benton  is  to  be  believed  as  President,  in 
preference  to  Mr.  Benton  as  a  feed  attorney ;  and  Levis  and 
Bowler  had  not  then  planned  the  "  $800,000  circular,"  and  the 
sale  of  the  road!  But  the  stockholders  did  begin  to  doubt 
Bowler;  for  on  his  second  election  he  received  1,223  less  votes 
than  the  average  vote  of  his  associates  in  the  Board.  It  took 
some  time  for  these  confiding  stockholders  to  be  undeceived.  Is 
one  short  year  too  brief  a  period  within  which  to  have  the  scales 
removed  from  their  blinded  eyes?  The  authorities  are,  that  to 
constitute  a  binding  confirmation,  the  party  to  be  estopped  must 
be  fully  aware  of  every  material  circumstance  of  the  transaction, 
and  "apprised  of  the  law,  how  those  facts  would  be  dealt  with 
if  brought  before  a  court  of  equity,"  Hoffman  Coal  Co.  v.  Cum- 
berland Coal  Co.,  16  Maryland,  456;  Lewin  on  Trusts  (Ed.  of 
1858),  615.  It  has  been  shown  that  Bowler  was  virtually,  the 
company,  until  the  election  in  1859.  Until  that  time,  as  has 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  579 

already  been  said,  Bowler  had  it  "  bound  hand  and  foot !"  How, 
then,  could  even  Branhara  and  others,  by  their  acts,  have 
worked  a  binding  estoppel  against  themselves  ?  But  they  were 
not  the  company ;  for,  "  If  the  whole  body  of  members  existing 
at  any  given  time  be  collected  together  within  our  view,  we  do 
not  see  the  corporation,  although  we  see  the  existing  corpora- 
tors ;  for  the  corporation  is  identified  not  with  them,  but  with 
them,  their  predecessors,  and  successors,"  Grant  on  Corporations, 
2;  American  Ed.  of  1854,  14. 

VI. — ERNST  AND  ASSOCIATES  NOT  INNOCENT  PURCHASERS. 

They  had  actual  notice. — Gedge  bid  off  the  road,  and  was  a 
director.  Stevenson  was  attorney  in  the  foreclosure  suit.  Ernst 
was  a  bidder  on  the  road,  and  afterward,  as  President  of  the 
Covington  City  Council,  endeavored  to  prevent  suit  for  its  re- 
covery. Stowers  was  a  director  elected  to  sue  for  the  road. 
Keith  and  Hathaway  were  holders  of  bonds,  and  knew  all  about 
the  sale,  or  were  chargeable  with  such  notice  as  would  put  a 
prudent  person  on  inquiry,  which  is  equivalent  to  actual  notice, 
Cotton  v.  Hart,  1  Marshall,  58.  They  are  estopped  from  deny- 
ing notice  by  the  recitals  in  the  deed  under  which  they  claim, 
in  which  the  sale  to  Bowler  is  referred  to  as  the  foundation  of 
their  titles.  They  did  not  pay  a  round  price,  but  only  thirty 
to  fifty  cents  on  the  dollar ;  for  that  took  ample  security,  and 
can  not  be  injured  by  appellant's  recovery. 

OPINION  OF  THE  COURT. 

On  the  25th  of  April,  1873,  Judge  LJNDSAY,  on  the  part  of 
the  Court,  delivered  the  following  opinion  : 

The  Covington  and  Lexington  Railroad  Company,  a  corpo- 
ration created  by  the  laws  of  the  State  of  Kentucky,  had  con- 
structed, and  in  the  year  1858  was  operating,  its  road  from  the 
city  of  Covington,  in  Kenton  County,  to  the  town  of  Paris,  in 
the  county  of  Bourbon,  and  had  also  secured  a  lease,  for  the 
term  of  ten  years,  of  the  Maysville  &  Lexington  Railroad,  from 
Paris  to  the  city  of  Lexington.  Being  largely  indebted,  the 
company  made  default  in  the  payment  of  the  interest  falling 
due  on  certain  of  its  bonds  on  the  1st  of  September,  1858  ;  and 
on  the  28th  of  November  thereafter,  James  Winslow,  Trustee, 


580  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

in  a  deed  of  trust  made  and  executed  April  8,  1853,  to  secure 
the  payment  of  the  principal  and  interest  of  these  bonds,  insti- 
tuted a  suit  in  equity  in  the  Fayette  Circuit  Court,  setting  up 
this  default,  and  asking  that  the  Court  place  him  in  possession 
of  and  allow  him  to  -control  and  manage  the  property  of  the 
company,  for  the  purpose  of  paying  the  interest  so  in  arrear, 
costs  of  suit,  etc. 

On  the  27th  of  December,  he  amended  his  petition,  and 
prayed  an  absolute  sale  of  the  property,  rights,  and  franchises 
of  the  company.  Other  persons  to  whom  the  company  was 
indebted,  and  who  were  interested  in  the  subject-matter  of  the 
suit,  made  themselves  parties  thereto.  After  a  feeble  and  in- 
effectual defense,  a  judgment  was  rendered  directing  the  sale, 
as  prayed  for.  On  the  5th  of  October,  1859,  all  the  property, 
rights,  credits,  and  franchises  of  the  company  were,_sold  at  pub- 
lic auction  for  the  sum  of  two  million  one  hundred  and  twenty- 
five  thousand  dollars.  William  H.  Gedge,  who  was  at  the  time 
one  of  the  directors  of  the  company,  was  the  ostensible  pur- 
chaser; but  the  actual  purchaser  was  R.  B.  Bowler,  who  was 
also  a  director.  Bonds  were  executed,  and  securities  deposited 
with  the  Court's  Commissioner,  as  was  required  by  the  terms  of 
the  judgment. 

Branham,  Desha,  and  other  stockholders,  excepted  to  the 
confirmation  of  the  sale;  but,  upon  hearing,  their  exceptions 
were  overruled,  the  sale  confirmed,  and  the  road  and  all  its  ap- 
purtenances delivered  to  the  purchaser.  By  its  judgment,  the 
Court  reserved  "full  power,  by  summary  proceedings  against 
the  purchaser,  to  enforce  compliance  with  all  the  terms  of  sale, 
and  until  full  payment  thereof,  to  coerce  said  purchaser  to  keep 
the  road  in  good  repair  and  order,  so  as  to  do  the  business  of 
the  railroad  with  safety  and  dispatch ;  and  in  case  of  default  on 
the  part  of  the  purchaser  in  making  payment,  or  in  complying 
with  any  of  the  terms  of  the  sale,  or  in  keeping  the  property  in 
good  order  and  repair,  may  [might]  appoint  a  receiver,  or 
order  a  sale  thereof."  This  judgment  can  not  be  fully  executed 
for  many  years,  as  a  large  number  of  the  bonds  of  the  com- 
pany will  not  mature  until  the  year  1885. 

On  the  1st  of  January,  1861,  Bowler  and  certain  other  per- 
sons formed  a  joint  stock  association  for  the  purpose  of  acquiring, 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  581 

holding,  and  operating  the  road.  Afterward,  on  the  1st  of  Janu- 
ary, 1863,  other  persons  became  interested  in  this  association, 
and  the  title  was  vested  in  Q.  A.  Keith  and  William  Ernst,  who 
were  to  hold  as  trustees  for  the  parties  beneficially  interested, 
upon  the  terms  and  conditions  and  for  the  uses  and  trusts  set 
out  and  declared  in  a  deed  made  and  executed  to  them  by  Bow- 
ler and  wife  on  the  30th  of  January,  1863. 

On  the  30th  of  September,  1865,  the  Covington  and  Lexing- 
ton Railroad  Company  instituted  this  action  in  the  Kenton  Cir- 
cuit Court  against  the  trustees,  Ernst  and  Keitrli,  and  the  per- 
sons for  whom  they  held,  including  the  widow  and  infant  children, 
and  the  personal  representative  of  Bowler,  who  was  then  dead, 
seeking,  among  other  things,  to  have  the  Court  adjudge  that  the 
defendants  held  the  road  in  trust  for  the  benefit  of  the  company, 
and  to  have  the  same,  and  the  rights  and  franchises  thereunto 
appertaining,  surrendered  to  it.  This  relief  was  asked  upon  two 
grounds, — First:  because  Robert  B.  Bowler  was  a  director  of  the 
company  and  a  trustee  for  the  stockholders  at  the  time  he  pur- 
chased, and  that,  by  the  well-established  rules  of  equity,  his  pur- 
chase inured  to  the  benefit  of  his  cestuis  que  trust.  Second: 
because,  prior  to  the  sale,  he  had  violated  his  duties  as  trustee 
by  willfully  mismanaging,  or  causing  the  Directory  to  mismanage 
and  misappropriate,  the  funds  of  the  company,  with  the  view  of 
bringing  about  the  sale  of  the  road,  in  order  that  he  might  be 
enabled  to  possess  himself  of  the  property  intrusted  by  the  stock- 
holders to  his  care  and  management. 

Appellees  answered,  pleading :  First,  to  the  jurisdiction  of 
the  Kenton  Circuit  Court ;  second,  estoppel  by  reason  of  a  for- 
mer adjudication ;  third,  that  the  action  was  barred  by  lapse  of 
time ;  fourth,  specific  and  general  denials  of  all  the  material 
allegations  of  the  petition ;  fifth,  that  all  persons  interested,  ex- 
cept the  personal  representative,  widow,  and  heirs-at-law  of 
Bowler,  were  purchasers  in  good  faith,  for  a  valuable  consider- 
ation, without  notice,  knowledge,  or  belief  of  the  commission  of 
any  of  the  alleged  frauds. 

Certainly,  the  Kenton  Circuit  Court  has  no  power  to  set  aside, 
vacate,  or  modify  the  orders  or  judgments  of  the  Fayette  Circuit 
Court  j  and  it  is  equally  clear  that  "  the  judgments  or  decree 
of  a  court  of  competent  jurisdiction  is  not  only  final  as  to  all 


582  COV.  &  LEX.  R.  R.  CO-  v.  BOWLER,  ET  ALS., 

matters  determined  by  it,  but  it  also  is,  in  general,  final  as  to 
every  other  matter  incident  to  the  cause  which  the  parties  might 
have  put  in  issue  and  had  litigated."  But  in  this  action,  appellant 
can  have  relief  without  disturbing  the  judgment  of  the  Fayette 
Circuit  Court.  That  judgment  may — in  fact,  must — remain  in 
full  force  arid  effect  until  completely  executed.  The  sale  to  Bow- 
ler can  not  be  set  aside,  nor  the  order  confirming  it  annulled,  in 
this  or  any  other  collateral  proceeding ;  but  the  Kenton  Circuit 
Court,  having  jurisdiction  of  the  persons  to  be  affected  by  its 
judgment,  may  rightfully  determine  and  declare  whether  or  not 
the  appellees,  who  claim  under  this  sale,  hold  in  trust  for  the 
railroad  company. 

The  settlement  of  this  question  involves  matters  that  were 
not  pertinent  to  the  suit  in  the  Fayette  Court.  The  right  of 
Winslow  and  the  creditors  of  the  company  represented  by  him, 
to  have  judgment  for  the  sale  of  the  road,  was  made  perfect  by 
the  default,  for  sixty  days  after  demand,  in  the  payment  of  the 
interest  due  on  the  company's  bonds.  It  was  immaterial,  so  fur 
as  they  were  concerned,  whether  this  default  resulted  from  actual 
inability  upon  the  part  of  their  debtor  to  make  the  stipulated 
payment,  or  from  the  bad  faith  and  mismanagement  of  Bowler 
and  his  co-directors.  Besides,  one  of  the  grounds  relied  on  for 
relief  is  the  charge  that  the  directors,  acting  under  the  influence 
and  control  of  Bowler,  willfully  failed  and  refused  to  make  an 
honest  defense  to  Winslow's  suit,  and  needlessly  permitted  judg- 
ment to  be  rendered  in  his  favor,  when  it  was  within  their  power, 
by  a  proper  application  of  the  moneys  of  the  company,  to  have 
redeemed  the  forfeiture  and  protracted  the  litigation  until  terms 
could  have  been  made  with  the  company's  creditors,  and.  its 
debts  paid  out  of  the  rapidly  increasing  earnings  of  the  road. 
The  company  could  make  defense  to  Winslow's  suit  only  in  its 
corporate  capacity.  With  this  defense,  Bowler,  as  a  member  of 
the  Board  of  Directors,  was  charged.  If  he  failed  to  perform 
this  duty,  those  claiming  through  him,  or  under  and  by  virtue 
of  his  purchase,  can  not  demand  protection  upon  the  idea  that 
he  failed  to  do  all  things  necessary  to  induce  the  chancellor  to 
exercise  "  a  large  equitable  discretion  in  regard  to  the  time  and 
manner  of  enforcing  Winslow's  rights."  It  is  of  this  failure  the 
company  now  complains. 


f 

IN  THE  KENTUCKY  COURT  OF  APPEALS.  583 

Even  if  it  be  true,  as  insisted  by  appellees,  that  the  facts 
stated  in  the  petition  in  this  action  would  have  constituted  an 
equitable  plea  to  the  Court  of  Equity  for  relieving  the  company 
from  the  effect  of  the  forfeiture  incurred  by  the  default  in  the 
payment  of  interest,  and  of  giving  time  to  redeem  that  forfei- 
ture ;  yet  as  this  equitable  plea  ought  to  have  been  interposed 
by  the  directors  of  the  company,  and  was  not,  the  failure  to 
present  it  can  not  be  regarded  as  a  sufficient  reason  for  protect- 
ing one  of  these  faithless  directors  in  the  enjoyment  of  the  profit 
he  realized  from  his  breach  of  official  duty.  The  purchase  at 
the  decretal  sale  was  the  culminating  act  of  the  fraudulent  mis- 
management charged  against  Bowler  and  his  associate  directors, 
and  it  is  the  title  or  interest  he  acquired  under  that  purchase 
with  which  the  appellant  here  seeks  to  be  invested.  Winslow's 
judgment  does  not  preclude  it  from  seeking  such  relief  in  a  new 
and  independent  action,  and  its  right  thereto  was  not  and  could 
not  have  been  determined  in  his  suit. 

A  judgment  in  favor  of  appellant  need  not  result  in  a  conflict 
of  jurisdiction  between  the  Kenton  and  Fayette  Courts.  It  may 
be  adjudged  in  this  proceeding  that  Bowler  held  under  his  pur- 
chase, and  that  these  appellees  now  hold  in  trust  for  the  com- 
pany, and  that  upon  the  performance  of  certain  prescribed  con- 
ditions, it  is  entitled  not  only  to  the  property  held,  but  to  be  sub- 
stituted for  the  appellees  in  the  management  and  control  of  that 
property ;  and  yet  it  will  be  left  for  it  to  secure  the  exercise  of 
this  last-named  right,  by  applying  to  the  Fayette  Court,  and  sub- 
mitting to,  and  performing,  the  conditions  imposed  by  its  judg- 
ment upon  the  purchaser  of  the  road — just  as  Ernst  and  Keith 
did  when  they  appeared  in  that  court,  on  the  llth  of  February, 
1864,  and  claimed  and  were  admitted  to  such  right  of  substi- 
tution under  and  by  virtue  of  the  conveyance  made  to  them  as 
trustees  by  Bowler  and  wife,  on  the  80th  of  January,  1863. 
Neither  court  will  be  called  upon  to  subordinate  itself  to  the 
other.  The  Kenton  Court  will  determine  for  whose  benefit  the 
appellees  hold  ;  and  the  Fayette  Court  will  require  the  party 
claiming  under  this  determination  to  hold  and  enjoy  the  property 
subject  to  the  duty  of  performing  the  judgment  in  favor  of  Wins- 
low  in  the  exact  manner  prescribed  by  that  judgment. 

Bowler  claimed  that  he  had  acquired  under  his  purchase  a 


584  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

vendible  interest  in  the  property.  These  appellees  have  dis- 
tinctly recognized  this  claim  by  purchasing  interests  in  the  joint 
stock  association.  Having  an  interest  which  may  be  sold  and 
conveyed,  if  it  be  held  in  trust  for  another,  and  those  holding  it 
repudiate  the  trust,  the  beneficiary  may  undoubtedly  call  upon  a 
court  of  equity  to  declare  the  existence  of  the  trust,  and  to 
compel  the  recusant  trustees  to  relinquish  claim  to  the  trust 
estate. 

Incident  to  this  question  of  jurisdiction  comes  up  the  plea  of 
estoppel.  When  the  Commissioner  of  the  Fayette  Court  filed 
his  report  of  the  sale  to  Bowler,  certain  stockholders,  represent- 
ing themselves  and  other  stockholders,  with  no  authority  to 
speak  for  the  corporation,  and  not  pretending  to  have  any  such 
right,  excepted  to  its  confirmation — among  others — upon  the 
ground  that  "  W.  H.  Gedge,  the  ostensible  bidder,  and  R.  B. 
Bowler,  the  actual  bidder,  were,  at  the  time  of  the  sale,  directors 
of  the  company,  and,  in  the  matter  of  said  sale,  acted  against 
the  direct  interest  and  express  wishes  of  the  stockholders,  and 
purchased  for  their  individual  benefit."  In  passing  upon  and 
overruling  this  exception,  the  court  determined  the  rights  of 
those  only  who  filed  it.  The  stockholders,  acting  as  individuals, 
could  not  raise  an  issue  nor  provoke  a  judgment  that  would  bind 
the  corporation.  The  company  did  not  object  to  the  confirma- 
tion of  the  sale,  and  raised  no  controversy  as  to  the  right  of  the 
chancellor  to  accept  Bowler  as  a  bidder,  nor  was  it  bound  to 
raise  this  issue  at  that  time  ;  but  even  if,  under  ordinary  cir- 
cumstances, it  would  have  been,  this  case  would  be  an  excep- 
tion to  the  rule.  There  were  then  but  eight  directors  in  office. 
One  of  them  was  the  bidder,  and  three  others — John  T.  Levis, 
the  President,  William  H.  Gedge,  and  B.  W.  Foley — became 
sureties  on  the  bonds  executed  by  the  bidder.  By  becoming 
parties  to  the  transaction,  these  four  directors  put  it  out  of  the 
power  of  the  remaining  four  to  act,  and  left  the  company  with- 
out the  legal  capacity  to  object  to  the  perpetration  of  the  wrong 
of  which  it  now  complains.  If  Bowler  desired  to  preclude  the 
corporation  by  the  judgment  rendered  upon  the  stockholders' 
exceptions,  he  should  have  taken  the  proper  steps  to  make  it  a 
party  to  the  issue  raised  by  those  exceptions.  He  failed  to  do 
so,  and  its  rights  are  not  affected  by  that  judgment,  Brown  v. 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  585 

LaCrosse  Eailroad  Company,  2  Wallace,  301;  Angell  &  Ames 
on  Corporations,  section  370. 

We  do  not  regard  this  as  an  action  for  the  recovery  of  real 
property,  nor  an  action  for  relief  on  the  ground  of  fraud,  in  the 
sense  in  which  those  terms  are  used  in  our  Revised  kStatutes. 
It  is  a  suit  to  declare  and  enforce  an  implied  or  constructive 
trust.  The  cause  of  action,  if  one  exists,  accrued  when  Bowler 
finally  and  decisively  repudiated  the  claim  of  appellant,  and 
asserted  title  in  himself.  The  limitation  to  actions  of  this  char- 
acter is  five  years.  Bowler,  after  the  confirmation  of  the  sale, 
recognized  the  claim  of  the  company,  and  professed  to  be  ready 
and  willing  to  surrender  the  property  purchased.  He  published 
in  one  of  the  Cincinnati  newspapers  a  proposition  looking  to  this 
end,  which  stood  open  till  the  stockholders'  meeting  on  the  22d 
of  December,  1859.  This  proposition  was  not  accepted,  and 
from  that  time  forward  he  claimed  the  property  as  his  own,  and 
the  statute  then  began  to  run  in  his  favor.  Five  years,  six 
months,  and  twenty-eight  days  elapsed  before  suit  was  brought. 
Bowler,  however,  died  intestate  on  the  fourth  day  of  July,  1864. 
The  statutory  bar  was  not  then  complete.  There  was  no  ad- 
ministration upon  his  estate,  in  this  state,  until  February  13, 
1865.  If  the  personal  representative  of  Bowler  is  a  necessary 
party  to  this  action,  it  was  commenced  in  time.  Assuming,  as 
must  be  done  in  settling  this  question,  that  Bowler  originally 
held  as  trustee  for  the  corporation,  he  could  not,  if  living,  have 
been  required  to  surrender  the  property  until  he  was  placed  in 
statu  quo.  He  would  be  entitled  to  have  restored  to  him,  with 
legal  interest,  all  moneys  he  had  rightfully  expended  for  the 
benefit  of  the  company,  and  to  reasonable  compensation  for  his 
services,  and  to  have  himself  and  his  estate  relieved  from  all 
liability  to  the  plaintiff,  in  the  Fayette  judgment.  He  would, 
however,  be  required  to  account  to  the  company  for  the  earn- 
ings of  the  road.  As  he  is  dead,  this  account  can  not  be  stated, 
and  a  judgment  rendered  thereon,  either  for  or  against  the  ap- 
pellant, without  the  presence  of  his  administrator.  The  execu- 
tion of  the  conveyance  of  January  30,  1863,  by  which  Ernst 
and  Keith  were  constituted  trustees  for  the  joint  stock  associ- 
ation, does  not  dispense  with  the  necessity  of  making  Bowler's 
heirs  and  representatives  parties.  If  a  cestui  que  trust  bring  a 


586  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

suit  against  a  third  person  to  whom  the  trustee  has  assigned 
the  property  in  violation  of  the  trust,  the  trustee  should  be  made 
a  party,  for  he  is  ultimately  bound  for  the  due  fulfillment  of  the 
trust,  Story's  Eq.  PI.  sec.  209 ;  Bust  v.  Dennet,  2  Brown's 
Ch.  225  ;  Land  v.  Blanchard,  4  Hare,  28. 

Notwithstanding  the  assignment  to  Ernst  and  Keith,  Bowler 
continued  to  occupy  the  relation  of  trustee  for  appellant,  and  in 
an  action  by  the  beneficiary  to  recover  the  trust  property,  his 
representative  should  be  made  a  party.  But  if  it  be  doubtful, 
in  cases  in  which  no  settlement  of  accounts  is  necessary,  whether 
the  representative  of  the  deceased  trustee  is  an  indispensable 
party,  there  can  be  no  doubt  but  that  Bowler's  heirs  are  neces- 
sary parties  to  this  action.  This  suit  is  in  respect  to  the  prop- 
erty held  in  trust  for  them  by  Ernst  and  Keith.  It  is  not  pros- 
ecuted merely  to  establish  a  debt  or  create  a  charge  which  the 
trustees  will  be  compelled  to  satisfy  out  of  the  trust  property, 
but  it  involves  an  absolute  recovery  of  the  property  itself.  In 
such  a  case,  the  beneficiaries,  who  have  the  equitable  and  ulti- 
mate interest  to  be  affected,  as  well  as  the  trustees,  are  neces- 
sary parties,  Story's  Eq.  PI.  sec.  207;  Mitford's  Eq.  PL,  by 
Jeremy,  176  to  179. 

It  is  also  to  be  observed  that  the  conveyance  under  which 
Ernst  and  Keith  hold  as  trustees,  does  not  invest  them  with 
that  character  of  title  that  will  authorize  them  to  represent  their 
cestuis  que  trust  in  a  suit  prosecuted  for  the  recovery  of  the  abso- 
lute trust  property.  It  is  their  duty  as  trustees  to  hold  the  prop- 
erty for  the  purposes  and  uses  declared  in  the  deed.  They  have 
no  power  to  sell,  and  are  to  hold,  "subject  to  the  Board  of  Con- 
trol" of  the  association;  and  if  said  "Board  of  Control"  should 
appoint  other  trustees,  they  contract  that  they  will  convey  the 
property  to  the  new  trustees,  upon  the  uses  and  trusts  declared 
in  the  conveyance  to  them.  They  have  no  power  even  to  con- 
vey, except  as  directed  by  the  "  Board  of  Control,"  and  then 
only  for  such  purpose  or  purposes  as  may  be  calculated  to  pro- 
mote the  interests  of  those  for  whom  they  hold.  Now,  it  is  a 
well-established  rule  of  equity  practice  that,  if  trustees  have  no 
power  of  disposition,  persons  having  demands  against  the  trust 
property,  existing  prior  to  the  creation  of  the  trust,  can  not  en- 
force these  demands  without  making  the  persons  claiming  the 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  587 

benefit  of  the  trust,  parties  to  their  suit,  Story's  Eq.  PI.  sec. 
140,  and  authorities  cited.  As  it  would  have  been  impossible  to 
settle  the  controversy  without  the  presence  of  Bowler's  heirs, 
the  court  would  have  brought  them  in  of  its  own  motion,  before 
proceeding  to  judgment,  if  appellant  had  failed  to  make  them 
parties,  Sec.  40,  Civil  Code  of  Practice. 

The  death  of  Bowler  so  far  interrupted  the  running  of  the 
statute  as  to  authorize  appellant  to  commence  its  action  against 
his  heirs  and  representatives  after  the  expiration  of  five  years 
from  the  accrual  of  its  cause  of  action,  provided  it  instituted 
its  suit  within  one  year  after  the  qualification  of  his  personal 
representative.  It  did  commence  its  suit  within  a  year  after 
administration  in  this  state,  and  its  right  to  sue  was  saved  by 
the  exception  stated,  Sec,  5,  art.  4,  chap.  63,  Rev.  Stat.  132. 

Bowler  was  not  charged  with  the  duty  of  selling  the  prop- 
erty intrusted  to  his  management.  Hence,  he  did  not  purchase 
at  his  own  sale.  But  he  was  acting  as  trustee  for  the  stock- 
holders, and  as  agent  and  representative  of  the  corporation,  and 
was  under  obligations  to  use  his  best  exertions  in  its  behalf,  in 
all  matters  relating  to  its  affairs,  and  especially  in  a  matter  im- 
periling its  very  existence.  He  purchased  the  property  of  his 
cestui  que  trust  at  a  sale  made  pursuant  to  a  judgment  from 
which  he  and  his  co-directors  might  have  prosecuted  an  appeal. 
He  thereby  placed  himself  in  a  position  in  which  his  personal 
interests  were  adverse  to  those  of  the  corporation.  He  continued 
to  hold  his  place  as  a  director  until  the  sale  was  confirmed,  and 
the  road  and  its  appurtenances  delivered  to  him  by  the  court, 
and  until  he  was  superseded  by  the  election  of  a  new  Board. 
These  facts  are  calculated  to  excite  suspicion  as  to  his  faithful- 
ness and  diligence  in  the  discharge  of  his  fiducial  duties. 

He  was  made  a  director  in  1857,  and  at  once  became  the 
controlling  member  of  the  Board.  His  skill  as  a  financier  was 
recognized  by  his  associates,  and  it  is  manifest,  from  the  record 
before  us,  that  they  deferred  to  him  in  all  matters  of  importance. 
When  he  came  into  the  directory,  he  found  the  company  greatly 
embarrassed.  It  had  been  forced  to  suspend  the  payment  of 
interest  accruing  on  some  of  its  inferior  securities.  It  was  re- 
garded as  a  matter  of  prime  importance  that  its  road  should 
be  put  in  good  repair,  and  its  rolling  stock  and  machinery 


588  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

increased.  It  was  estimated  by  a  committee  of  directors,  report- 
ing June  10,  1858,  that  to  accomplish  the  ends  proposed,  would 
require  about  $145,000.  To  use  this  sum  would  place  it  out  of 
the  power  of  the  company  to  pay  the  next  installment  of  interest 
on  the  third  mortgage  bonds,  and  it  was  resolved  that  this  interest 
should  not  be  paid.  At  the  same  meeting,  the  directors  ap- 
pointed a  select  committee  to  report  a  plan  of  operations  to  the 
holders  of  the  company's  bonds.  Of  this  committee,  Bowler  was 
a  member.  On  the  19th  of  the  month,  the  committee  reported 
that  it  would  require  nearly  $800,000  to  put  the  road  into  com- 
plete condition,  and  that  the  expenditure  of  the  amount  indicated 
would  render  it  necessary  that  the  company  should  suspend  the 
further  payment  of  interest  on  all  its  indebtedness  for  the  period 
of  five  years.  This  report  was  termed  a  "  Proposition  to  Bond- 
holders," and  concluded  with  this  extraordinary  -announcement : 
"Believing  that  it  is  to  the  interest  of  the  bondholders  to  carry 
out  the  suggestion  of  this  report,  and  that  the  repair  and  equip- 
ment of  the  road  should  be  immediately  commenced,  the  Board 
will  proceed  to  do  so,  presuming  that  you  will  ratify  this  report." 
The  Directory  adopted  the  recommendation  of  the  committee, 
and  immediately  resolved,  "  That  so  much  of  the  resolution, 
passed  at  the  regular  meeting  of  the  Board  in  this  month,  as 
declares  the  company  unable  to*  pay  the  December  interest  on 
the  third  mortgage  bonds,  be  and  the  same  is  hereby  rescinded ;" 
and  it  was  ordered  that  such  interest  be  paid  out  of  any  moneys 
belonging  to  the  company.  Without  waiting  for  a  conference 
with  the  company's  creditors,  the  directors  proceeded  to  adver- 
tise for  proposals  for  the  repairs  and  improvements  deemed 
necessary  to  put  the  road  in  a  first-class  condition. 

The  holders  of  the  second  mortgage  bonds  held  a  meeting 
on  the  1st  of  November,  1858.  They  declined  to  accede  to  the 
"Proposition  to  Bondholders,"  and  demanded  that  the  interest 
then  due  on  their  bonds  should  be  paid  by  the  1st  of  January, 
1859.  The  Board  of  Directors,  upon  notification  of  this  demand, 
directed  its  president  to  inform  the  committee  of  bondholders 
that  it  could  not  be  complied  with,  in  consequence  of  the  abso- 
lute want  of  funds;  but  to  give  assurance  that  they  had  reason 
to  believe  that,  during  the  year  1859,  the  company  "would  be 
enabled  to  pay  fully  the  coupons  on  the  first  and  second  mort- 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  589 

gage  bonds,  matured  and  maturing  up  to  that  time,  and  regu- 
larly to  continue  to  do  the  same  at  all  times  thereafter."  The 
result  of  this  communication  was  the  institution,  on  the  29th  of 
November,  1858,  of  Winslow's  suit.  The  regular  meeting  of 
the  stockholders  of  the  company  was  held  on  the  IGth  of  De- 
cember, 1858.  The  President,  in  his  report  to  this  meeting,  did 
not  allude  to  this  suit,  although  he  was  served  with  process  on 
the  first  day  of  that  month.  At  this  meeting,  Bowler  and  his 
co-directors  were  continued  in  office. 

Notwithstanding  Winslow's  suit,  and  the  assurance  given  that 
the  company  would  be  able  in  1859  to  comnience  and  thereafter 
continue  the  payment  of  interest  accruing  on  its  first  and  second 
mortgage  bonds,  the  directory,  immediately  after  the  re-election 
of  the  members  of  the  Board,  proceeded  to  carry  out  the  design 
of  putting  the  road  in  complete  condition.  On  the  14th  of 
April,  1859,  a  committee,  of  which  Bowler  was  a  member,  was 
appointed  and  clothed  with  full  power  "  to  ascertain  and  adopt 
the  best  and  most  valuable  improvement  across  Townsend's  Valley, 
for  the  permanent  future  use  of  the  railroad,  and,  after  consulta- 
tion with  a  competent  engineer,  to  put  the  same  under  immediate 
contract."  April  28th,  the  Board  determined,  upon  the  recom- 
mendation of  a  committee  composed  of  Bowler,  Gedge,  and  Foley, 
to  close  a  contract  for  the  purchase  of  depot  grounds  in  the 
city  of  Covington,  and,  on  the  12th  of  May,  the  payment  of 
twenty-seven  thousand  dollars,  the  purchase  price  therefor,  was 
ordered. 

Bowler  was  present,  and  an  active  participant  in  every  meet- 
ing of  the  Board  after  his  election  as  director,  and  until  the  road 
was  sold  and  passed  into  his  possession.  The  record  discloses 
the  further  fact,  that,  during  the  most  of  the  time  he  was  acting 
for  the  company  as  director,  he  persistently  depreciated  the 
value  of  its  bonds,  and  yet  constantly  bought  them  up  at  prices 
thus  depreciated.  In  the  Spring,  Summer,  and  Autumn  of 
1859,  Winslow  was  actively  pressing  his  suit  for  a  sale  of  the 
road,  and  Bowler  was  purchasing  largely  the  inferior  securities 
of  the  company,  using  the  danger  of  the  judicial  sale,  which  it 
was  his  duty  to  avert,  if  possible,  as  proof  that  the  price  he  was 
willing  to  give  was  their  full  value.  By  purchasing  these  se- 
curities, he  placed  himself  in  a  position  either  to  purchase  the 


590  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

road  when  sold,  at  greatly  less  than  its  value,  or  to  realize 
immense  profits  upon  the  amounts  invested  in  them.  Before  the 
sale  of  the  road  was  adjudged,  he  held  more  than  one-half  of 
the  third  mortgage  bonds,  and  $369,000  of  the  income  bonds  of 
the  company.  Hence  it  was  to  his  interest  that  the  sale  should 
be  adjudged,  and  that  no  appeal  should  be  prosecuted  from  the 
judgment  when  rendered.  Accordingly,  in  August,  1859,  he 
was  contracting  with  other  parties  interested  in  these  inferior 
securities,  to  establish  a  basis  upon  which  to  compromise  their 
conflicting  interests,  should  they,  or  either  of  them,  purchase  the 
road.  From  the  moment  that  Bowler  concluded  to  prepare  for 
the  purchase  of  the  road,  his  personal  interests  became  antago- 
nistic to  those  of  the  corporation,  and  he  should  have  ceased  to 
act  as  a"  director.  Instead,  however,  of  doing  so,  he  held  on  to 
his  position;  and  when  we  contemplate  his  official  acts  in  the 
light  of  subsequent  events,  we  can  not  avoid  the  conclusion  that, 
as  a  member  of  the  Board  of  Directors,  his  influence  was  used 
for  the  promotion  of  his  personal  ends.  Instead  of  looking  alone 
to  the  interests  of  the  stockholders  and  creditors  of  the  company, 
their  rights  were  not  only  disregarded,  but  deliberately  sacri- 
ficed, that  profit  might  result  to  him. 

It  was  perfectly  plain  that  the  interest  accruing  on  the  first 
and  second  mortgage  bonds  must  be  paid  as  it  matured,  or  terms 
made  with  the  holders  of  those  bonds.  The  holders  of  the  third 
mortgage  bonds  would  naturally  hesitate  to  resort  to  their  legal 
remedies  so  long  as  the  income  of  the  company  was  faithfully 
applied  to  keeping  the  road  in  repair,  and  to  the  payment  of  pre- 
ferred debts.  The  cities  of  Covington  and  Cincinnati,  and  the 
county  of  Pendleton,  had  no  option,  so  far  as  their  bonds  were 
concerned,  except  to  pay  them  and  the  interest  as  it  accrued,  if 
the  company  failed  to  do  so.  The  holders  of  the  income  bonds 
had  no  security  at  all  except  the  earnings  of  the  road,  and  hence 
it  was  their  interest  to  keep  it  in  the  hands  of  the  company. 
Such  being  the  situation  of  affairs,  the  refusal  of  the  directors  to 
pay  the  interest  on  the  first  and  second  mortgage  bonds,  and  the 
diversion  of  the  company's  funds  to  the  purchase  of  depot 
grounds,  and  to  the  making  of  repairs  and  improvements  on  the 
road,  which  might  have  been  readily  dispensed  with,  evidences 
an  intention,  on  the  part  of  those  responsible  for  the  line  of 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  591 

conduct  pursued,  to  bring  the  road  to  sale.  In  1858,  the  pros- 
pect for  an  increase  of  business,  and  consequently  of  increased 
receipts,  was  by  no  means  discouraging.  There  had  been  a 
steady  increase  in  earnings  during  the  years  1856,  1857,  and 
1858.  In  the  last-named  year,  the  road,  after  the  payment  of 
all  running  expenses,  earned  $198,316.80.  Twenty-five  per 
centum  of  this  amount  would  have  satisfied  the  interest  falling 
due  on  the  first  and  second  mortgage  bonds,  on  the  1st  of  Sep- 
tember, 1858.  It  was  in  the  payment  of  this  interest,  which 
was  less  than  forty-eight  thousand  dollars,  that  default  was  made. 
An  agreement  to  pay  it  by  the  1st  of  January,  1859,  which 
might  have  been  made  and  performed,  would  have  pre- 
vented the  institution  of  Winslow's  suit.  This  the  directory 
not  only  declined  to  do,  but  after  suit  had  been  commenced, 
they,  fully  apprised  of  the  inevitable  result  of  their  action, 
deliberately  used  the  company's  moneys  in  the  purchase  of 
extensive  depot  grounds,  arid  in  making  upon  the  road  u  the 
best  and  most  valuable"  improvements. 

The  money  used  for  these  purposes,  and  in  the  payment  of 
debts  that  were  not  pressing,  and  the  collection  of  which  the 
holders  could  not  press  without  endangering  their  ultimate  loss, 
would  have  more  than  paid  off  the  accrued  interest  on  these 
bonds,  and  redeemed  the  forfeiture  on  Winslow's  mortgage.  The 
whole  amount  of  interest  due  arid  unpaid  on  the  first  and  second 
mortgage  bonds,  at  the  time  judgment  was  rendered  in  favor  of 
Winslow,  was  less  than  $100,000.  In  the  year  1859,  before  the 
road  was  taken  out  of  the  hands  of  the  company,  its  net  earn- 
ings were  $227,734.77.  Out  of  this  sum,  the  interest  unpaid  at 
the  time  the  mortgages  were  foreclosed,  as  well  as  that  falling 
due  on  the  1st  of  September,  1859,  might  have  been  paid,  and 
fully  $100,000  devoted  to  improving  and  repairing  the  road,  and 
to  the  payment  of  the  floating  debt  of  the  company. 

The  judgment  of  foreclosure  and  the  sale  of  the  road  were 
the  direct  and  necessary  consequences  of  this  misapplication 
of  the  company's  funds.  Bowler  was  not  only  an  adviser 
and  advocate  of  the  non-payment  of  the  interest  accrued  and 
accruing  on  the  company's  bonds  (except  of  the  third  mortgage, 
in  which  he  was  largely  interested),  and  the  expenditure  of  its 
means  in  rendering  the  road  more  valuable  to  the  purchaser  at 


592  COV.  &   LEX.  R.  R.  CO.   v.  BOWLER,  ET  ALS., 

the  decretal  sale;  but  in  the  month  of  June,  1859,  while  it  was 
still  possible  to  redeem  the  forfeiture,  and  leave  Winslow  without 
a  cause  of  action,  he  was,  as  a  party  to  Winslow's  suit,  urging 
a  speedy  sale  of  the  road,  and  resisting  a  postponement  of  the 
trial  of  the  cause. 

His  conduct  in  the  premises  can  not  be  defended  upon  the 
idea  that  his  action  as  a  director  was  approved  by  his  co-direct- 
ors. It  is  not  denied  that  he  exercised  over  them  a  controlling 
influence.  Besides  this,  when  we  consider  that  he  purchased 
the  road  when  sold,  through  the  agency  of  a  co-director,  W.  H. 
Gedge ;  that  the  President  of  the  company,  John  T.  Levis,  and 
two  of  the  directors,  W.  H.  Gedge  and  B.  W.  Foley,  became 
sureties  for  him,  on  the  bonds  he  was  required  to  give,  and  that 
he  made  this  President  the  Superintendent  of  the  road  imme- 
diately upon  receiving  possession  of  it ;  and  that  Levis  and 
Gedge  became  partners  with  him  in  the  joint  stock  association 
formed  in  1861,  we  may  readily  infer  why  it  was  that  he  was 
able  to  dictate  a  line  of  policy  resulting  so  profitably  to  himself. 

In  March,  1859,  Lucius  Desha,  the  director  for  Harrison 
County,  resigned.  A  suitable*  person  applied  for  the  place  thus 
made  vacant;  but  the  Directory,  Bowler,  Levis,  Gedge,  and 
Foley,  being  present,  and  constituting  a  majority  of  the  mem- 
bers in  tire  meeting,  resolved  that  there  was  "no  urgent,  indis- 
pensable necessity  for  the  election  of  a  director  for  Harrison 
County,  before  the  next  regular  meeting  of  the  Board."  The 
vacancy  was  never  filled ;  and  when  Levis,  Gedge,  and  Foley 
became  parties  to  Bowler's  purchase,  the  company  was  left  with- 
out a  Directory. 

There  is  no  doctrine  better  settled,  nor  more  universally 
recognized,  than  that  an  agent  or  trustee  can  not  rightfully 
place  himself  in  a  position  creating  in  his  own  bosom  a  conflict 
between  self-interest  and  the  duty  he  owes  to  those  for  whom  he 
acts.  Generally,  such  persons  will  not  be  allowed  to  purchase 
and  make  profit  out  of  the  estate  of  those  toward  whom  they 
occupy  a  confidential  relation.  A  purchase  made  by  the  trustee, 
when  the  cestui  qiie  trust  is  sui  juris,  and  after  the  relation  is 
understood  to  be  dissolved,  will  not  be  upheld,  except  where 
"  there  is  a  clear  contract,  ascertained  to  be  such  after  a  zealous 
and  scrupulous  examination  of  all  the  circumstances ;  and  it  is 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  593 

clear  that  the  cestui  que  trust  intended  that  the  trustee  should  buy, 
and  there  is  no  fraud,  no  concealment,  and  no  advantage  taken  by 
him  as  trustee,"  Coles  v.  Trecothick,  9  Vesey,  234.  Testing 
Bowler's  rights  by  this  rule,  and  applying  the  doctrine  an- 
nounced to  the  facts  of  this  case,  we  perceive  no  ground  upon 
which  a  court  of  equity  can  rest  a  denial  to  appellant  of  the 
relief  it  seeks. 

The  company  has  not  lost  its  right  to  demand  relief  be- 
cause of  acquiescence  in  Bowler's  purchase  and  possession. 
In  no  instance  has  it  manifested  an  intention  to  abandon  its 
claim  to  the  property.  Its  failure  to  accept  the  proposition, 
made  through  the  columns  of  a  newspaper,  at  the  stockholders' 
meeting  of  December  22,  1859,  does  not  prejudice  its  rights, 
nor  raise  the  presumption  of  acquiescence  on  its  part.  To 
this  proposition,  conditions  were  attached  to  which  the  com- 
pany was  neither  legally  nor  morally  bound  to  accede.  It  had 
the  right  to  have  its  property  delivered  to  it  by  placing  Bowler 
in  statu  quo.  He  could  not  take  advantage  of  the  possession  he 
had  wrongfully  obtained  to  compel  the  company  to  satisfy  debts 
then  due  and  payable,  much  less  to  indemnify  him  against  loss 
on  account  of  the  investments  he  had  made  in  its  inferior  secu- 
rities. It  was'  unreasonable  and  unconscientious  in  him  to  re- 
quire, in  addition  to  being  relieved  from  all  expense  and  liability 
incurred  in  making  the  purchase,  that  he  should  then  be  paid 
the  amount,  with  interest,  he  had  invested  in  these  securities. 
They  were  not  then  due,  and,  except  for  the  unpaid  interest,  he 
had  no  right  of  action  against  the  corporation.  The  distinction 
between  this  and  the  case  of  Roach  v.  Hudson,  S  Bush,  410,  is, 
that  in  the  one  the  party  holding  under  an  implied  trust  offered 
in  good  faith  to  execute  the  trust,  asking  only  to  have  returned 
to  him  the  money  he  had  actually  expended ;  and  in  the  other, 
the  trustee  demanded  the  immediate  settlement  of  claims  discon- 
nected from,  and  not  growing  out  of,  the  trust. 

In  addition  to  this  fact,  we  can  not  regard  Bowler's  propo- 
sition as  having  been  made  in  good  faith.  He  knew  that,  for  the 
time,  it  was  impossible  for  the  company  to  comply  with  it.  Its 
Directory  had  been  disorganized  by  the  open  defection  of  hinr- 
self,  Levis,  Gedge,  and  Foley.  Every  cent  of  its  available  funds 
had  been  paid  out  under  the  orders  of  Bowler  and  his  associates, 

38 


594  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

and  its  only  source  of  revenue  was  then  in  the  hands  of  the 
faithless  fiduciary  who  was  dictating  the  terms  upon  which  he 
would  repair  the  great  wrong  perpetrated  by  him  upon  those 
who  had  trusted  him.  The  refusal  to  entertain  this  proposition, 
and  the  failure  to  sue  until  nearly  the  requisite  length  of  time  to 
bar  its  action  had  elapsed,  present  no  obstacle  to  the  interpo- 
sition of  a  court  of  equity  in  behalf  of  the  company.  At  most, 
it  but  remained  inactive  when  it  might  have  prosecuted  its  claim 
for  relief.  But  merely  remaining  passive  does  not  deprive  a 
party  of  the  right  to  seek  relief,'  unless,  in  addition  thereto,  he 
does  some  act  to  induce  or  encourage  others  to  expend  their 
money,  or  to  alter  their  condition,  and  thereby  renders  it  un- 
conscientious  for  him  to  enforce  his  rights.  No  such  act  upon 
the  part  of  the  company  is  shown  in  this  case. 

We  do  not  regard  the  question  of  the  solvency  of  the 
company,  at  the  time  of  the  Bowler  purchase  of  the  road, 
as  a  matter  of  very  great  consequence.  The  fact  that  the 
Judge  of  the  Fayette  Circuit  Court  regarded  it  as  insolvent, 
doubtless  induced  him  to  sell  it  instead  of  leasing  or  placing 
it  in  the  hands  of  a  receiver.  But,  notwithstanding  that  con- 
viction upon  the  part  of  that  judge,  if  the  insolvent  company 
had  bid  off  the  road  at  the  whole  amount  of  the  debts  em- 
braced by  his  judgment,  and  made  the  necessary  deposits  and 
gave  the  required  securities  for  the  performance  of  the  judg- 
ment, its  bid  would  certainly  have  been  accepted.  As  a  matter 
of  law,  the  bid  of  a  person  representing  the  company  and 
holding  under  his  bid  for  its  benefit,  was  accepted.  The  com- 
pany demands  to  be  allowed  the  benefit  of  its  agent's  purchase, 
and  it  is  not  for  him  to  say  that  his  principal  was  and  is  insol- 
vent, and,  therefore,  will  not  be  able  to  hold  the  property  against 
its  creditors. 

It  is  the  duty  of  the  company,  out  of  the  earnings  of  the 
road,  to  pay  all  its  debts.  If  this  can  not  be  done,  then  the 
members  of  the  corporation,  the  holders  of  stock,  are  morally 
bound  to  take  the  necessary  steps  to  regain  the  possession  of  the 
road,  that  it  may  be  again  sold  for  the  benefit  of  those  of  the 
creditors  of  the  corporation  whose  debts  are  not  provided  for,  it 
being  reasonably  certain  that  a  resale  will  result  beneficially  to 
them.  We  will  not  in  this  case  inquire  whether  or  not  appellees 


IN  THE  KENTUCKY  COURT  OF  APPEALS.  595 

hold  the  property  for  a  resale.  It  is  true  that  generally  when  a 
trustee  purchases  trust  property,  he  holds  for  a  resale  ;  but  this 
rule  is  not  universal.  Longest' 's  adm'r.  v.  Tyler's  ex'r.,  1  Duvall 
192.  Whatever  the  rule  in  this  case  may  be,  it  can  not  enlarge  the 
rights  of  the  appellees.  They  can  not  demand  that  the  property 
shall  be  again  sold.  When  they  are  divested  of  title,  and  sur- 
render the  possession  of  the  property  to  its  owner,  the  company, 
its  unpaid  creditors  may,  if  they  choose,  in  the  proper  court, 
ask  a  resale;  but  it  is  not  necessary,  in  the  adjudication  of  the 
questions  involved  in  this  cause,  that  we  shall  anticipate  such 
action  upon  the  part  of  these  unpaid  creditors.  % 

An  inspection  of  the  conveyance  from  Bowler  and  wife  to 
Ernst  and  Keith,  shows  that  none  of  the  appellees  are  purchas- 
ers without  notice  of  appellants'  claim.  After  providing  that 
the  property  shall  be  held  primarily  for  the  payment  of  the  debts 
embraced  by  Bowler's  bid,  and  reciting  that  it  was  expressly 
understood  that  said  property  was  conveyed  subject  to  the  lien 
reserved  by  the  judgment  of  the  Fayette  Court,  and  that  the 
trustees  were  always  to  provide  for  and  protect  that  lien,  the 
deed  further  provides  :  "  That  should  said  railroad  be  taken  from 
said  trustees,  or  said  Bowler,  by  any  other  claim  in  law  or  in 
equity,  and  said  joint  stock  association  be  deprived  of  the  use, 
occupation,  and  profits  thereof,  by  any  claim  other  than  the 
bonded  debts,"  that  Bowler  shall  refund  to  his  associates  the 
amounts  paid  by  them  respectively,  in  the  manner  and  form,  and 
out  of  a  certain  fund  therein  set  out  and  described.  As  it  was  a 
matter  of  public  notoriety  that  Bowler's  claim  was  not  recog- 
nized by  the  company,  and  that,  for  some  considerable  time  after 
his  purchase,  the  possibility  of  a  suit,  by  the  company,  to  re- 
cover possession  of  the  road,  was  canvassed  in  the  public  prints, 
we  have  no  difficulty  in  understanding  why  it  was  that  those 
purchasing  from  Bowler  should  require  this  covenant  of  special 
warranty  to  be  inserted  in  the  deed.  They  had  reason  to  be- 
lieve that  the  company  had  not  abandoned  its  claim  to  the  road, 
and  they  knew  that  Bowler  was  a  director  of  the  company  when 
he  bought  it  at  the  decretal  sale.  They  had  such  notice  of  the 
infirmity  of  their  vendor's  title  as  put  them  on  inquiry;  and 
hence  they  contracted  for  indemnity  against  possible  loss  by 
reason  of  such  infirmity. 


596  COV.  &  LEX.  R.  R.  CO.  v.  BOWLER,  ET  ALS., 

For  the  reasons  stated,  it  is  considered  that  the  judgment  of 
the  Kenton  Circuit  Court,  dismissing  appellant's  petition,  be 
reversed.  The  cause  is  remanded  for  a  settlement  of  the  ac- 
counts between  the  parties  upon  the  basis  prescribed  in  the  man- 
date of  this  court,  and  then  for  a  judgment  as  to  the  ownership 
of  the  property  in  litigation,  and  the  right  of  the  appellant  to 
possession  and  control  of  said  property,  conformable  to  the  views 
expressed  in  this  opinion. 

MANDATE. 

In  pursuance  of  the  foregoing  OPINION,  on  the  2d  of  June, 
1873,  the  following  mandate  was  filed  in  the  cause  by  the 
Judges : 

Appellant  is  to  be  credited : 

1.  With  any  moneys  arising  out  of  the  earnings  of  the  road 
•while  in  the  custody  of  the  officers  of  the  Fayette  Circuit  Court, 
before  possession  was  delivered  to  Bowler,  and  which  may  have 
been  paid  to  him,  or  paid  out  for  his  benefit.     Upon  any  such 
amount  legal  interest  will  be  allowed  from  the  date  of  payment. 

2.  With  the  gross  earnings  of  the  road  from  the  time  it  was 
placed  in  Bowler's  possession.      Legal  interest  will  be  allowed 
from  the  end  of  each  year  upon  the  amount  earned  in  each  year ; 
and,  for  the  purpose  of  computing  this  interest,  it  will  be  proper 
to  adopt  the  date  fixed  by  Bowler  and  his  successors  as  the  end 
of  their  current  fiscal  year. 

Appellees  are  to  be  credited: 

1.  With  all  sums  of  money  paid  on  the  debts  of  the  company 
under  and  pursuant   to  the  judgment   of  the   Fayette  Circuit 
Court,  and  in  satisfaction  of  the  amount  bid  by  Bowler  at  the 
decretal  sale.     Upon  these  sums  interest  will  be  computed  from 
the  date  of  payment. 

2.  With  all  sums  of  money  expended  by  them  in  keeping 
the  road  in  good  repair,  and  in  keeping  up  the  rolling-stock  and 
machinery.     Also,  for  proper  improvements  to  the  road,  includ- 
ing   fills,    bridges,    and   depot-houses,  and    in   the  purchase  or 
acquisition  of  additional  rolling-stock,  and  in  the  purchase  of 
necessary   depot-grounds.     Upon  the   sums    expended,  interest 
will  be  computed  from  the  end  of  the  current  fiscal  year  within 
which  the  expenditure  may  have  been  made. 


IN  THE  KENTUCKY  COURT  OF  APPEALS, 

3.  With  the  actual  running  expenses  of  the  road,  including 
reasonable  compensation  to  the  Directory  or  Board  of  Control ; 
also,  to  the  Superintendent  and  other  necessary  and  proper 
officers  and  employes.  Upon  the  sums  so  expended,  interest 
will  be  computed  from  the  end  of  each  current  fiscal  year. 

In   making   up  these   accounts,    they   should    be    separately ' 
stated:    1.  As  to  the  time  Bowler  held  and  run  the  road    for 
himself.     2.  As  to  the  time  it  was  held  and  run  by  the  first  joint- 
stock  association.     3.  As  to  the  time  it  has  been  held  and  run 
by  the  present  association. 

But  unless  these  parties,  or  their  representatives,  who  are 
all  appellees,  agree  as  to  the  facts  necessary  to  enable  the  court 
to  state  the  accounts  as  last  indicated,  appellant  is  not  to  be  de- 
layed by  any  litigation  that  may  arise  between  them,  but  shall 
have  a  settlement  in  the  manner  first  pointed  out,  without 
any  unnecessary  delay. 

If  it  shall  be  found  that  there  is  a  balance  due  to  appellees, 
they  will  be  entitled  to  a  judgment  against  the  company  for  the 
amount  thereof,  and,  until  such  judgment  is  satisfied,  appellant 
will  not  be  allowed  to  proceed  further  with  its  suit.  The  Chan- 
cellor will  also  put  it  upon  terms,  either  to  pay  off  and  satisfy 
such  judgment  within  one  year  after  its  rendition,  or  to  suffer  a 
dismissal  of  its  petition. 

If,  upon  the  other  hand,  it  shall  be  found  that  there  is  a  bal- 
ance due  to  the  company,  judgment  shall  be  rendered  in  its 
favor  against  the  appellees,  conforming  to  the  separate  state- 
ment of  accounts  allowed,  if  the  same  can  be  made.  If  not? 
then  a  judgment  in  gross  against  all  the  appellees  personally 
liable  for  such  balance  (a). 

(a)  By  the  provisions  of  the  act  to  amend  section  900  of  the  Civil  Code  of 
Kentucky,  approved  March  6,  1868,  "no  mandate  shall  issue,  or  decision  become 
final,"  until  after  the  expiration  of  thirty  judicial  days  from  the  time  the  decision 
was  rendered.  The  filing  of  a  petition  for  rehearing  has  the  effect  to  suspend  the 
taking  effect  of  the  mandate  until  the  petition  is  passed  upon.  If  such  petition 
is  filed  within  the  time  granted  by  the  Court,  the  issuing  of  the  mandate,  or  its 
becoming  final,  is  accordingly  suspended  until  the  same  is  acted  upon  by  the 
Court. 

On  the  application  of  the  appellees  to  the  Court  of  Appeals,  time  for  the 
filing  of  a  petition  for  rehearing  was  extended  to  the  1st  day  of  August,  1873. 


LIST  OF  CITED  CASES. 


PAG*. 

ABBOTT  v.  AMERICAN  HARD-RUBBER  Co.,  33  Barb.  578 109 

Aberdeen  Railway  Co.  v.  Blaikie,  1  M'Queen,  461 96,  n.lll,  123,  135 

Ackerman  v.  Emott,  4  Barb.  628 338 

Albany  Harding,  27  Beavan,  11 n.39 

Alienbrook  v.  Hall,  2  Wilson,  309 106 

Allen  v.  Curtis,  26  Conn.  456 444 

Allen's  Heirs  v.  Hall,  1  Marshall,  526 ,545 

Armstrong's  Appeal,  68  Penn.  Stat.  (18  P.  F.  Smith),  409 n.377 

Arnettw.  Cloudas,  4  Dana,  300 549 

Ashhurst's  Appeal,  60  Penn.  290 n.203  570 

Attorney-General  v.  Bowyer,  3  Vesey,  714 228 

Same  v.  Cradock,  3  Mylne  &  Craig,  85 n.40 

Same  v.  Lady  Denning,  Wilmot's  Notes,  pp.  1,  26 229 

Same  v.  Master  of  Brent  wood  School,  1  Mylne  &  Keen,  376 230 

'      Same  v.  Mayor  of  Dublin,  1  Bligh,  312.. ." 230 

Same  v.  Skinner's  Co.,  2  Russell,  407.....". 229 

Same  v.  Tancred,  1  Eden,  10 229 

Ayliffe  v.  Murray,  2  Atk.  59 8,    51 

Ayres  v.  Mitchell,  3  Smede  &  Mar.  683 205 

Badcock,  Exparte,  1  Mont.  &  Mac.  231 n.49 

Badger  v.  Badger,  2  Clifford's  Dist.  Ct.  137 n.169 

Bage,  Exparte,  4  Maddock,  459 w-49 

Baker  ».  Bliss,  39  New  York,  70 387 

Baker  v.  Whiting,  3  Sumner's  Ct.  Ct,  485 «.72,n.l33,  569 

Bankart  v.  Tennant,  10  Equity  Cases  (L.  R.  S.),  145 n.133,  566 

Barnett,  Exparte,  7  Jurist,  116 124 

Barwell  v.  Barwell,  34  Beavan,  375 .• n.39 

Battle  v.  Wilson,  14  Ohio,  257 •'• • n.315 

Bayard  v.  Farmers'  and  Mechanics'  Bank,  52  Penn.  232 387 

Beagle  v.  Wentz,  5  P.  F.  Smith's  Penn.  374 367 

Beaumont  v.  Boultbee,  5  Vesey,  485 357 

Beckford  v.  Wade,  17  Vesey,  87 357 

Bell  v.  Webb  &  Mong,  2  Gill,  170 566 

Bishop  v.  Little,  3  Greenleaf,  405 552 

Blannerhassett  v.  Day,  2  Ball  &  B.  128 n.39    49 

Blight's  Heirs  v.  Tobin,  7  Mon.  612 n.146,  n.166,  562,  569 

Bohannon's  Heirs  v.  Streshley's  Executors,  2  B.  Mon.  437 246,  249 

Bond  v.  Hopkins,  1  Sch.  &  Lef.  429 «.38 

Bonham  v.  Metropolitan  Railway  Co.,  Eng.  Law  Rep.,  3  Ch.  Ap.  337 444 

Bonliam's  Case,  Doctor,  8  Coke,  118 «-457 

Boone  v.  Childs,  10  Pet.  177 5? 

Bower  w.  Earl,  18  Mich.  373 »-38,  565 

599 


600  LIST   OF  CITED    CASES. 


PAGE. 

Boyd  v.  Blankman,  29  California,  19 «.141 

Boyd  v.  M'Clean,  Uohns.  Ch.  583 297,  304,  429 

Brashearz'.  Gratz,  6  Wheaton,  529 429 

Breckenridge  v.  Glasse,  1  Crag.  &  Phil.  (18  Eng.  Chan.)  126 w.387 

Breckenridge  v.  Holland,  2  Blatch.  377 559 

Bridgman  v.  Holt,  Show.  P.  C.  Ill «.457 

Bronson  v.  La  Crosse  and  Mil.  B.  B.  Co.,  2  Wallace,  283 w.268,  444,  564 

Brooke  v.  Earl  of  Bivers,  Hardr.  503 w.457,  459,  460 

Brown  v.  De  Tastet,  Jac.  284 352 

Brown  v.  La  Crosse  Bailroad  Co.,  2  Wallace,  301 584 

Burch  v.  Breckenridge,  16  B.  Mon.  488 n.296 

Burt  v.  Dennet,  2  Brown's  Ch.  225 586 

Butler  v.  Carter,  5  Eng.  Ch.  Cases,  276 n.169,  566 

Butler  v.  Haskell,  4  Dessaus.  (S.  C.)  702 r».204,  569 

Caldecott  v.  Brown,  2  Hare,  144 393 

Campbell  v.  Mackay,  1  Mylne  &  Craig,  603 40 

Campbell  v.  Corley,  1  DeGex&  Jones,  238 n.308 

Campbell  v.  Walker,  13  Vesey,  600 _ 9,  53,  n.179 

Campbell  v.  Walker,  5  Vesey,  Jr.,  678 9,  n.48,  «.51,  53,  n.179 

Cane  v.  Lord  Allen,  2  Dow,  289 49 

Carlisle.  Long,  3  Marshall,  435 545 

Carr  v.  Hilton,  1  Curtis's  C.  C.  390 387 

Carson  v.  Murray,  3  Paige,  483 n.315 

Chalmer  v.  Bradley,  1  Jac.  &  Walk.  51 357 

Chalmondely  v.  Clinton,  2  Jac.  &  Walk.  139 n.39,  145,  569 

Champions.  Bigby,  1  Buss.  &  Mylne,  539 49,  552 

Chapman  v.  Gray,  8  Georgia,  341 w.315 

Chapman  &  Harkness  v.  Bailroad  Companies,  6  Ohio  St.  136 130 

Charte  v.  Kennington,  2  Str.  1173 «.457 

Chronister  v.  Busbey,  7  Watts  &  Serg.  152 378 

Church  v.  Marine  Insurance  Co.,  1  Mason,  341 50 

Churchill,  Exparte,  8  Veaey,  Jr.  343 «.49,  124 

Clarkson  v.  Depeyster,  Hopk.  Ch.  426 338 

Clay  v.  Clay,  3  Metcalf,  552 «.112 

Clegg  v.  Edmondson,  8  De  Gex,  Macn.  &  Gor.  787 «.203 

Coffey  v.  Wilkerson,  1  Metcalf,  101 246,  248 

Cokef.  Izard,  7  Wallace,  559 562 

Coleman  v.  Eastern  Counties  B.  B.  Co.,  4  Eng.  Bailway  Cas.  513. ...72,  «.268,  566 

Cole's  Administrator  v.  M'Bae,  6  Band.  644 283 

Coles  v.  Trecothick,  9  Vesey,  234,  246 13,  ».49,  51,  593 

Collison's  Case,  Hobart's  Bep.  136 228 

Colwell  v.  Wood,  3  Watts,  196 426 

Commonwealth  v.  Moltz,  10  Penn.  530 ».132 

Company  of  Mercers  v,  Bowker,  1  Stra.  639 460 

Compton  v.  Collinson,  2  Brown's  Ch.  377 ».315 

Comstock  v.  Crawford,  3  Wallace,  304 279 

Cook  v.  Collingridge,  Jacob,  607 351,  352 

Copeland  v.  Copeland,  28  Maine,  525 ....w.131 

Cotton  v.  Hart,  1  Marshall,  58 579 


LIST   OF   CITED   CASES.  601 

Crane  v.  Prather,  4  J.  J.  Marsh.  77 569 

Crawshay  v.  Collins,  15  Vesey,  218 352 

Crowe  v.  Ballard,  1  Vesey,  215 ^99 

Cumberland  Coal  and  Iron  Co.  v.  Sherman  et  oZ.,  30  Barbour,  553 w.87 

Cunningham  v.  Pell,  5  Paige,  607 , «.431,  449 

Dale  v.  Hamilton,  22  Eng.  Ch.  266 n.189 

Davidson  v.  Barclay,  36  Penn.  406 «.131,  566 

Davidson  v.  Gardner g 

Davoue^.  Fanning,  2  Johns.  252 1,  51,  n. 99, 123,  154,  559 

Day  v.  Salvadge,  Hobart,  87 «.458 

Dellinger's  Appeal,  35  Penn.  357 «.315 

Dentz/.  Dent,  30  Beavan,  363 394,395,  396 

Devaughn  v.  Devaughn,  19Grattan 279 

Dillaye  v.  Greenough,  45  New  York,  45 «.309 

Dimes  v.  Grand  Junction  Canal,  3  House  of  Lords  Cases,  794 w.457 

Dobson  v.  Racey.  3  Saund.  61 559 

Dockers.  Somes,  2  Mylne  &  Keen,  655 26,  352 

Dodge  v.  Wolsey,  18  How.  341 w.269,  444 

Doungsworth  v.  Blair,  1  Keen,  801 141 

Drury  v.  Cross,  7  Wallace,  302 w.110,  w.lll,  575,  577 

Dudley  v.  Price,  10  B.  Mon.84 544 

Dumbell,  Ex  parte,  12  Vesey,  Jr.  372 «.49 

Dunbar  v.  Frederick,  2  Ball  &  Beat.  317 «.99 

Dunscomb  v.  Dunscomb,  1  Johns.  Ch.  508 338 

Duvall  v.  Graves,  7  Bush.  461 «.296 

Dye  v.  Holland,  4  Bush.  635.... 551 

Edrington  v.  Harper,  3  J.  J.  Marshall,  356 421,  425,  426 

Egerton  v.  Derby,  12  Coke,  114 w.457 

Elmendorf  v.  Taylor,  10  Wheat.  168 «.145 

Esdaile  v.  Lund,  12  Mil.  &  W.  734 ».458 

Eyre  v.  Countess  of  Shaftsbury,  2  Eq.  Abridgment,  710,  pi.  2 229 

Faikney  v.  Eeynous,  Burr,  2069 106 

Faris  and  wife  v.  Dunn,  7  Bush,  276 ».308 

Farmers  Russell,!  Bar.  &  Pul.  296 105 

Farnham  v.  Brooks,  9  Pick.  212 552 

Featherstonhaugh  v.  Fenwick,  17  Vesey,  298 352 

Field  v.  Schieffelin,  7  Johns.  Ch.  150 387 

Follansbez'.  Kilbreth,  17  Illinois,  523 ».101,  ».204,  «.420 

Findley  v.  Langford,  1  Marsh.  364 ".146,  569 

Fish  v.  Miller,  1  Hoff.  Ch.  270 »-356 

Fleming  v.  Teran,  12  Geo.  394 566 

Flood's  Case,  1  Eq.  Abridgment,  95,  pi.  6 228 

Florentine  v.  Barton,  2  Wallace,  210 278 

Foss  v.  Harbottle,  2  Hare,  461 «.431,  443,  444 

Foster  v.  Oxford,  Worcester  and  Wolverhampton  Railway  Co 81,     85 

Foster  w.  Shreve,  6  Bush,  529 w-132 

Fox  v.  Mackreth,  2  Bro.  400;  6  Ves.  627;  9  Ves.  247 7,  14,  ».48,  51,  ».85,    i 

Freeman  v.  Starwood,  49  Maine,  195 566 


602  LIST   OF   CITED   CASES. 

tf-  PAGE. 

Gaines  and  wife  v.  Keif  and  Chew,  2  How.  619 40 

Gaines  v.  Poor,  3  Metcalf,  503 «.315 

Garlinghouse  v,  Whitwell,  51  Barbour,  208 «.131 

Garver's  Adm'r  v.  Strode,  5  Littell,  314 546 

Gatty  v.  Phillipson,  7  Hare  (27  Eng.  Ch.),  516 72,  566 

Gibson's  Heirs  v.  Jones,  5  Leigh,  370 283 

Gibson  v.  Jeyes,  6  Vesey,  2774 51 

Gifford  z'.New  Jersey  Kailroad  Co.,  2  Stockton's  Ch.  171 «.39 

Girard  Life  Ins.  and  Trust  Co.  v.  Chambers,  10  Wright's  Penn.  485 359,  361 

Goodin  v.  Evans,  18  Ohio  St.  166 567 

Goodin  v.  Whitewater  Canal  Co.,  18  Ohio  St.  169 n.130,  n.264,  576 

Gower  v.  Davis  and  Smith,  2  Duvall,  17 544 

Gowlandf.  DeTaria,  17  Vesey,  18 «.99,  567 

Grant  v.  Grant,  12  Law  Times,  N.  S.  721 «.317 

Gray  v.  Lewis,  Eng.  Law  Rep.,  8  Eq.  Cases,  526 «.431 

Green's  Adm'r  v.  Creighton,  23  How.  90 w.319 

Green  v.  Ball,  4  Bush,  586 416 

Green  v.  Kutherforth,  1  Vesey,  462 223 

Green  v.  Cook,  24  Illinois,  190 .V. 428 

Green  v.  White,  1  Johns.  Ch.  27 n.175 

Greenlaw  v.  King,  5  London  Jurist,  18 «.176 

Gregory  v.  Gregory,  Cooper,  201 «.39,  357 

Gregorys.  Patchett,  33  Beavan,  595 444 

Griffin  v.  Coffey,  9  B.  Mon.  452 ,  415 

Hall  v.  Noyes,  3  Bro.  C.  C.  483 «.48 

Hard wicke,  Lord  v. Vernon,  4  Ves.  Jr.  41 1 ;  14  Ves.  Jr.  504 ;  2  Bro.  C.  C.  ..».410,    46 

Hannaz/.  Spott's  Heirs,  5  B.  Mon.  365 545 

Harkleyf.  Russell,  2  Sim.  &  Stuart,  244 w.143 

Hazlehurst  v.  Sav.,  Griffin  and  N.  Alabama  Railroad  Co.,  43  Georgia,  13 445 

Harrington  v.  Ford,  2  Mylne  &  Keene,  590 «.143 

Harris  v.  Hardeman,  14  How.  334 278 

Harrison,  Ex  parte,  1  Buck.  17 «.49 

Harrison^.  Lexington  and  Ohio  Railroad  Co.,  9  B.  Mon.  472 544 

Harvey  v.  Richards,  1  Mason,  381 319 

Harvey  v.  Tyler,  2  Wallace,  328 278 

Hatch  v.  Chicago,  Rock  Island  and  Pacific  Railroad  Co.,  6  Blatch.  105 450 

Hatch  v.  Cincinnati  and  Indianapolis  Railroad  Co.,  18  Ohio  St.  92 131,  w.344 

Hawkins  v.  Lambert,  18  B.  Mon.  106 546 

Hawleyw.  Cramer,  4Cowen,  734 «.176,  w.204 

Hawley  v.  Mancius,  7  Johns.  Ch.  189 w.175 

Haydenr'.  Booth,  2  Marshall,  354 545 

Hereford's  Case,  Mayor  of,  1  Salkeld,  396 «.457 

Hersey  v.  Veazie,  24  Maine,  9 444 

Hibbert  v.  Cooke,  1  S.  &  S.  552 394,  395 

Hieronymus  v.  Mayhall,  1  Bush,  508 551 

Hoffman  Coal  Co.  v.  Cumberland  Coal  Co.,  16  Md.  456 ».189,  w.204,  «.420, 

566,  567,  578 

Hoffman  v.  Macall,  6  Ohio  St.  125 «.425 

Hoge  v.  Hoge,  1  Watte'a  Penn.  163 367 


LIST   OF   CITED   CASES.  603 


Hoggins  v.  Becraft,  1  Dana,  30 JJJ 

Hollingsworth  v.  Barbour,  4  Peters,  466 278 

Holtt'.  Holt,  1  Chancery  Cages,  190 

Hoole  v.  Gt.  West.  Eailway  Co.,  Eng.  Law  Rep.  3  Ch.  Appeals,  262 442 

Hopkirk  v.  Page,  2  Brockenbrough,  20 iti  553 

Howell's  Heirs  v,  M'Crary,  7  Dana,  388 «.145   569 

Hughes,  Exparte,  6  Vesey,  617 M U  «.49'«99 

Hunt  v.  Hunt,  5  Law  Times,  778 „...  f  '„  315 

Hutton  v.  Duey,  3  Barr.  100 «  315 

Incorporated  Society  v.  Eichards,  1  Drury  &  Warren,  258 : 230 

Irwin  v.  Longworth,  20  Ohio,  581 w.425 

Jackson  v.  Van  Dalfsen,  5  Johnson,  43 13 

James,  Ex  parte,  8  Vesey,  337 11,  78,82,  w.99,  w.100,124,  564 

James  v.  Railroad  Co.,  6  Wallace,  752 289   562 

Jee  v.  Thurlow,  2  Barn.  &  Cress.  546 ».315 

Jenkins  v.  Eldridge,  3  Story,  182 106 

Johnson  v.  Jones,  13  Smede  &  Marsh.  583 205 

Jones  v.  Smith,  33  Mississippi,  215 «.189 

Jordan^.  Morney,  5  House  of  Lords  Cases,  185 «.203 

Kane  v.  Bloodgood,  7  Johns.  Ch.  90 w.249 

Kane  County  v.  Herrington,  50  Illinois,  232 158,  569 

Keech  v.  Sandford,  3  Equity  Cases  Abr.  741 5,  78,  ».86 

Kellick  v.  Flexny,  4  Bro.  C.  C.  161 «.48 

Kellogg  v.  Ely,  15  Ohio  St.  64 „ 130 

King,  Ann  Henrietta  v.  Talbott,  40  New  York  (Hand's),  76 339 

King,  Charlotte  E.  v.  Talbott,        "    "         "  "          "  339 

King,  The  v.  Inhabitants  of  Rishton,  1  Queen's  Bench,  «.479 w.458 

Same      v.  Justices  of  Essex,  5  Maule  &  Sel.  513 457 

Same     v.  Yarpole,  4  Term  Rep.  71 457 

Lacey,  Ex  parte,  6  Vesey,  625,  628 10,  «.49,  «.99 

Land  v.  Blanchard,  4  Hare,  28 586 

Lane  v.  Dighton,  Ambler,  409 26 

Le  Clercq  v.  Gallipolis,  7  Ohio,  pt.  1,  217 342,  343 

Leeds,  Duke  of  v.  Amherst,  2  Phillips  (22  Eng.  Ch.),  116 ».170,  570 

Lench  v.  Lench,  10  Vesey,  511 26 

Lester  v.  Lesteyr,  6  Vesey,  631.. 11 

Lightburnef.  Cooper,!  Dana,  273 549 

Lingenfelter  v.  Rio.hey,  8  P.  F.  Smith's  Penn.  485 367 

Linwood,  Exparte, • 124 

Livingston  v.  Story,  9  Peters,  632 446,  449 

London  ».  Wood,  12  Modern,  687 «-458 

Longest's  Adm'r  ».  Tyler's  Ex'r.,  1  Duvall,192 595 

Long  v.  Long,  2  S.  &  S.  119 4<>6 

Lord  v.  Jeffkins,  35  Beavan,7 39>  57° 

Lowry  v.  Com.  and  Farmers'  Bank,  Chief  Justice  Taney's  Decisions,  310 387 

Lowther  v.  Lowther,  12  Vesey,  95 wl2>  »-48 

Luxon  v.  Wilgus,  7  Bush,  205 - "-331 

Marsh  v.  Eastern  Railroad  Co.,  40  New  Hamp.  567 ».268,  563 

Martin  ».  Martin,  16  B.  Mon.  8 415 


604  LIST   OF  CITED   CASES. 


M'Afferty  v.  Conover's  Lessee,  7  Ohio  St.  105 w.130 

M'Carty  v.  Steam  Cotton  Press  Co.,  5  Louisiana,  16 53 

M'Clannahan  v.  Beasley,  17  B.  Mon.  117 w.296,  w.308 

M'Cormick  v.  Grogan,  4  English  and  Irish  Appeals,  82 w.400 

M'Leod  v.  Drummond,  17  Vesey,  152 387 

Meacham  v.  Sterns,  9  Paige,  405 338 

Mead  v.  Mitchell,  5  Abb.  106 552 

Meader  v.  Norton,  11  Wallace,  457 «.562 

Memphis  City  v.  Dean,  8  Wallace,  64 444 

Merriweather  v.  Lewis,  9  B.  Mon.  179 w.169 

Michoud  v.  Girod,  4  How.  503 97,  «.569 

Miller  and  wife  v.  Edwards,  7  Bush,  394 308 

Miller  v.  Chaplin,  20  Ohio  St.  442 w.252 

Miller  v.  Stokely,  5  Ohio  St.  194 «.390 

Miller's  Heirs  v.  Antle,  2  Bush,  408 415 

Milnor  v.  Millward,  39  Illinois,  40 429 

Mitchell  v.  Moore,  6  Bush,  661 ».132 

Moore  v.  Simpson,  5  Littell,  50 562 

Morgan's  Heirs  v.  Boone's  Heirs,  4  Mon.  297 ~ «.175 

Mongv.Bell,  7  Gill,  244 566 

Morrett  v.  Parker,  2  Atk.  52 175 

Morris  v.  Joseph,  1  W.Virg.  256 w.143 

Morris  v.  West,  1  W.  Virg.  256 566 

Morrison  v.  Caldwell,  5  Mon.  435 «.175 

Morse  v.  Eoyal,  13  Vesey,  355 12 

Mostyn,  Lord  v.  Spencer,  6  Beavan,  135 w  458 

Mozley  v.  Alston,  1  Phillips,  790 ».431,  443,  444 

Munro  v.  Allaire,  2  Caine's  Cas.  in  Error,  183 13 

Murrey  v.  Vanderbilt,  39  Barbour,  140 «.264 

Nairn  v.  Majoribanks,  3  Russell,  582 393 

Neves  v.  Scott,  9  How.  212 «.317 

Nichols  v.  Palmer,  5  Day,  47 «.315 

Norman  v.  Norman,  6  Bush,  496 w.53,  «.179,  ».347 

Ogdenw.  Walker's  Heirs,  6  Dana,  421 569 

Oliver  v.  Court,  8  Price,  127 w.49 

Oliver  v.  Piatt,  3  How.  333 50,  w.101,  «J33,  569 

Owen  v.  Foulkes,  6  Vesey,  Jr.  630 ».49,  124 

Packet  Co.  v.  Sickles,  5  Wallace,  592 .\..  564 

Parker.  White,  11  Vesey,  Jr.  226 ».48,  559 

Patrick's  Heirs  v.  Chenault,  6  B.  Mon.  321 ».146,  569 

Peabody  v.  Flint,  6  Allen,  52 «.431 

Pearce  v.  Madison  and  Indianapolis  Railroad  Co.,  21  How.  441 w.72,  567 

Pendleton  v.  Fay,  2  Paige,  202 387 

Penobscot  Railroad  Co.  v.  Weeks,  52  Maine,  456 278 

Perry  v.  Meddowcroft,  4  Beavan 429 

Philadelphia  v.  Heirs  of  Girard,  45  Penn.  State,  9 w.245 

Philadelphia  Baptist  Association  v.  Hart's  Ex'rs,  4  Wheat.  1 215,  227,  231 

Pierepont  v.  Barnard,  5  Barbour,  364 «.131 

Pindler  v.  Atkinson,  3  Md.  410 566 


LIST  OF   CITED   CASES.  605 

FAOR. 

Piatt  v.  St.  John's  College,  1  Cases  in  Chancery,  267 228 

Poillon  v.  Martin,  1  Saund.  Ch.  569 124 

Porter's  Case,  1  Coke's  Rep.  16 228 

Prevost  v .  Gratz,  6  Wheat.  481 50(  56,  146 

Prideaux  v.  Lonsdale,  4  Gilford's  Ch.  159 w.407 

Prideaux  v.  Lonsdale,  11  Weekly  Reporter,  531 w.72,  565 

Prosser  v.  Edmonds,  1  Younge  &  Call.  497 ~«.143 

Quackenbos  v.  Leonard,  9  Paige,  344 «.175 

Queen,  The  v.  The  Cheltenham  Commissioners,  1  Queen's  Bench,  467.-w.457,  w.458 
Same     v.  Justices  of  Hertfordshire,  6  Queen's  Bench,  753 45 

Randall  v.  Erington,  10  Vesey,  423 12 

Randle  v.  Gould,  8  Ellis  &  Blackburn,  457 «.315 

Rapelje  v.  Norsworthy's  Ex'rs,  1  Sandf.  Ch.  406 338 

Reed  v.  Beazley,  1  Blackford,  97 «.315 

Reynolds,  Ex  parte,  5  Vesey,  707 10,  «.49 

Richardson  v.  Jones,  3  Gill  &  Johns.  184 96 

Ridout  v,  Ringgold,  3  Gill  &  Johns.  1 566 

Roach  v.  Hudson,  8  Bush,  410 418,  497,  550,  593 

Robinson  v.  Smith,  3  Paige,  222 ».430 

Roche  v.  O'Brien,  1  Ball  &  Beat.  338 «.99 

Rochester  v.  Anderson,  3  Bibb,  399 545 

Rossett  v.  Fisher,  11  Gratt.  492 283 

Ryall  ».  Ryall,  1  Atk.  59 - 26 

Salve  v.  Ewing,  1  Duval,  271 551 

Samuels  v.  Express  Co.,  M'Cahon's  Rep.  214 444 

Scott  v.  Freeland,  7  Smede  &  Mar.  419 204,  205 

Sears  v.  Shafer,  2  Selden,  268 551 

Selsey,  Lord  v.  Rhoades,  2  Sim.  &  Stu.  41 49 

Severns  v.  Hill,  3  Bibb,  240 »-146,  569 

Shaw  v.  Spencer,  100  Mass,  382 387 

Shore  v.  Wilson,  9  Clark  &  Finnelly,  355 450 

Skinner  v.  Miller,  5  Littell,  86 412,  425 

Smith  v,  Lansing,  22  New  York,  526 • HO,  ».11< 

Souley  v.  Clockmakers'  Co.,  1  Bro.  Ch.  81 2 

Soohan  v.  The  City,  33  Penn.  St.  9 2 

Sparks  v.  Shropshire,  4  Bush,  552 n<™,  567 

Stackhouse  v.  Barnston,  10  Vesey,  467 M-3| 

Starr  v.  Wright,  20  Ohio  St.  97 **J 

Stone  v.  Wertz,  3  Bush,  490 *'ll( 

Talbott  v.  Todd,  5  Dana,  193. 545>  5°2 

Taylor  v.  Plumer,  3  Maule  &  Sel.  562 *6 

Taylor  v.  Stearns,  18  Gratt,  244 *89 

Tenant*/.  Elliott,  1  Bar- &  Pul.  3 ^ 

Thomas  v.  M'Cormick,  9  Dana,  108 

Thompson  v.  Thompson,  18  Ohio  St.  73 

Tilghman  v.  West,  8  Iredell's  N.  Cases  in  Equity,  184 "•Jjj 

Todd  v.  Wheeler,  1  Dana,  401 

Townsend  v.  Townsend,  1  Cox,  28 


606  LIST  OF  CITED   CASES. 


PAGE. 
Updegraffw.  Commonwealth,  11  Serg.  &  Eawle,  394 234 

Vanderheyden  v.  Vanderheyden,  2  Paige,  288 338 

Van  Epps  v.  Van  Epps,  9  Paige,  237 176,  «.176 

Vidal  v.  Girard,  2  Howard,  127 -.. 238,  239,  242,  244 

Vorhees  v.  Bank  of  the  United  States,  10  Peters,  449 278 

Same  v.  Baxter,  1  Abbott,  46 '. ;....  570 

Wade  v.  Pettibone,  11  Ohio,  57 ».189,  «.420 

Wallettf.  Collins,  10  How.  186 «.39,  569 

Walmsleyz'.  Booth,  2  Atk.  25 w.169 

Warner  ».  Blakeman,  41  New  York  (4  Keyes),  487 w.368 

Wash.  Alex.  &  Geo.  K.  E.  Co.  v.  Alex.  &  Wash.  E.  E.  Co.,  19  Gratt.  592 w.430 

Watt  v.  Grove,  2  Sch.  &  Lef.  492 «.49 

Watts  v.  Massie,  6  Cranch,  148 121 

Webster  v.  Eeid,  11  Howard,  437 278 

Webster  v.  Webster,  1  Small  &  Gif.  489 «.315 

Wedderburn  v.  Wedderburn,  4  Mylne  &  Craig  (18  Eng.  Ch.),  41 ra.414 

Wells  v.  Stout,  9  California,  494 «.315 

Wensinger  v.  Alemany,  40  California,  288. ".. w.343 

Whelpdale  v.  Cookson,  S.  C.  5  Vesey,  682. 7, 14,  78,    82 

Whichcote  v.  Lawrence,  3  Vesey,  Jr.  740 n.48,     51 

Whicker  v.  Hume,  7  House  of  Lords  Cases,  124 w.344 

Whitackre  v.  Whitackre,  Sel.  Ch.  Cases,  13 ».48 

Whitcomb  v.  Minchin,  5  Madd.  91 n.49 

Williams  v.  Champion,  6  Ohio,  169 w.39,  565 

Williams  v.  First  Presb.  Society  of  Cincinnati,  1  Ohio  St.  478 343,  «.343 

Williams  v.  Llewellyn,  2  You.  &  Jar.  68 49 

Williamson  v.  Williamson,  6  Paige,  306 339 

Willott  v.  Forman,  3  J.  J.  Marsh.  293 549 

Wilson  v.  Mushett,  3  Barn.  &  Adolph.  743 «.317 

Witman  v.  Lex,  17  Serg.  &  Eawle,  88 227,  232 

Wood  v.  Corporation  of  London,  12  Modern,  669 460 

Wood  v .  Downes,  18  Vesey,  125 : ».99 

Wood  v.  Dummer,  3  Mason,  309 135 

Wood  v.  Griffith,  1  Swan's  St.  55 143 

Woodhouse  v.  Meredith,  1  Jac.&  Walker,  204 «.49 

Woodward  v.  Woodward,  8  Law  Times,  N.  S.  749 ».317 

Wormley  v.  Wormley,  8  Wheat.  421 .50 

Worrall  v.  Jacob,  3  Merivale,  266 ».315 

Wray  v.  Steele,  2  Ves.  &  Bea.  388 423 

Wright  v.  Arnold,  14  B.  Mon.  646 ».112 

Yallop,  Ex  park,  15  Vesey,  60 350 

York  and  N.  Midland  Railway  Co.  v.  Hudson,  16  Bea.  486 w.101,  n.133 

York  Buildings  Co.  v.  Mackenzie «.17^  ».48, 76,  79,  82, 83,  w.85,  ».86 

Zabrieskie  v.  Cleveland,  Col.  and  Cincinnati  R.  E.  Co.,  23  How.  381...«.72,  «.567 
Zanesville  Canal  and  Manuf.  Co.  v.  City  of  Zanesville,  20  Ohio,  483 «.213 


INDEX. 


ACCOUNTS: 

1.  OPENING  ACCOUNTS.— The  bill  stated  that  an  account  had  been  made  out, 
showing  that  a  sum  was  due  plaintiff,  and  that  the  defendant  set  up  that 
account,  and  the  payment  of  the  balance,  as  a  final  settlement.    The  Jbill 
charged  the  contrary,  and  that  much  more  was  due  plaintiff,  as  would  ap- 
pear if  certain  accounts  were  rendered.     A  deed  of  release  had  been  exe- 
cuted by  the  plaintiff,  at  the  time  of  the  payment  of  the  balance  in  question. 
As  this  deed  of  release  acknowledged  the  receipt  of  certain  sums,  it  could 
not  be  wholly  set  aside ;  but  the  court  did  not  deprive  the  plaintiff  of  his 
right  to  the  accounts  which  he  sought.      Wedderburn  v.    Wedderburn    18 
Eng.Ch.40,       .-....' 348 

2.  LAPSE  OP  TIME. — Between  cestui  que  trust  and  trustee  HO  lapse  of  time  will 
preclude  the  account  in  a  case  in  which  the  relation  of  trustee  and  cestui 
que  trust  continues — the  transactions  between  them  are  not  closed,  and  the  \/ 
delay  of  the  claim  is  attributable  to  the  trustee  not  having  given  to  his 
cestui,  que  trust  information  to  which  he  was  entitled,  and  accounted  with  him 

in  such  manner  as  he  ought. — 76. 

How  ordered  to  be  taken  in  the  Covington  &  Lexington  R.  R.  Case,    .        .    596 
Settlement  of  Administrators'  accounts, n.377 

ACQUIESCENCE : 

Definition  of, w.38 

1.  The  rejection  of  a  proposition  made  through  the  columns  of  a  newspaper, 
to  which  conditions  are  attached  which  the  beneficiary  is  neither  legally  nor 
morally  bound  to  accept,  does  not  raise  the  presumption  of  acquiescence. 
Under  the  circumstances  in  this  case,  the  corporation  had  the  right  to  have 
its  property  delivered  to  it  by  placing  the  holder  in  statu  quo.     Coo.  &  Let. 
Railroad  Co.  v.  Bowler,  et  als.,        ........       467 

2.  The  offer  to  restore  in  this  case  distinguished  from  that  in  Roach  v.  Hudson, 
8  Bush,  410,  (reproduced  herein,  pages  418,  550,)  wherein  the  offer  of  resto- 
ration was  held  to  be  reasonable,  and  the  refusal  to  accept  the  same  held 
binding. — 76. 

3.  Merely  remaining  passive  does  not  deprive  a  party  of  the  right  to  seek  re- 
lief, unless,  in  addition  thereto,  he  does  some  act  to  induce  or  encourage 
others  to  expend  their  money  or  alter  their  condition,  and  thereby  renders 
it  tinconscientious  for  him  to  enforce  his  claim.     "No  such  act  upon  the 
part  of  the  company  is  shown  in  this  case." — 76. 

Rules  governing  acquiescence,        .        .        .        .    \  .        .     •  .        •  w-39 
Binding — is  in  the  nature  of  an  estoppel,                                              . 

Special  circumstances  may  render  acquiescence  binding,      .        .        .  «.169 

What  length  of  time  will  work  an  estoppel, w-39 

What  length  of  time  will  not,        .         .        .        .        .     ..        i    -    .  »-72 

Without  knowledge — is  not  binding, w-72 

607 


608  INDEX. 

ACQUIESCENCE— Continued. 

Held  binding  in  a  doubtful  case,  ».203,  w.204 

Where  held  not  binding, w.407 

Presumed,  where  adverse  possession  is  for  fifty  years,  .        .         .     w.344 

Does  not  bind  minor, w.170 

What  acts  of  the  attorney  will  bind  client  (see  ATTORNEY,  2,  3). 
See  TRUSTEE,  2 ;  AGENTS,  12. 

See  CORPORATION,  16;  CONFIRMATION  BY  CESTUI  QUE  TRUST;  STOCKHOLDERS; 
ELECTION  ;  ESTOPPEL,  4. 

ADMINISTRATOR'S  PURCHASE  OF  TRUST  ESTATE: 

1.  If  the  administrator  makes  a  sale  of  land  belonging  to  the  estate,  under  an 
order  of  court  procured  by  him,  and  becomes  the  purchaser  through  an- 
other person,  who  takes  the  legal  title  in  trust  for  the  administrator,  and 
afterward  conveys  it  to  him,  the  heir  retains  such  an  equitable  interest 
in  the  land  as   is  assignable,  and  the  assignee  may  maintain  an   action 
against  the  administrator  to  enforce  a  trust.     Bayd  v.  Elankman,  29  Cali- 
fornia, 19, '    '  .  '      .        .        .        .        147 

2.  HEIR'S  EQUITY. — In  such  case,  the  heir  retains  the  equitable  title,  and  his 
deed  conveys  such  title,  while  the  legal  title  is  vested  in  the  administrator 
who  holds  it  in  trust,  and  the  deed  of  the  heir  conveys  the  equitable  title, 
and  is  evidence  of  his  intention  to  disaffirm  the  sale. — Ib. 

3.  THE  TRUST  BINDS  THE  LAND. — There  are  strong  reasons  for  holding  that 
the  relation  of  trustee  and  cestui  que  trust  is  not  by  the  fact  of  the  sale  shifted 
from  the  land  to  the  proceeds  of  the  sale,  but  that  the  administrator  re- 
mains a  trustee  as  to  the  land  until  the  heir  affirms  the  sale. — 76. 

4.  THE  SALE  is  VOIDABLE. — The  sale  is  not  void,  but  only  voidable  at  the 
election  of  the  heirs  or  other  persons  interested  in  the  estate,  who  may  have 
the  sale  set  aside  and  the  administrator  declared  a  trustee.      If  the  court, 
in  a  matter  where   it  has  jurisdiction,  makes  an  order  upon  insufficient 
evidence,  or  contrary  to  the  evidence,  the  order  can  not  be  attacked  in  a 
collateral  proceeding. — 76. 

5.  COLLATERAL  SUIT.— If  an  administrator  procures  an  order  of  court  for  the 
sale  of  real  estate  to  pay  a  debt  which  he  had  previously  paid  with  funds  of 
the  estate,  it  is  not  a  fraud  which  will  enable  the  order  to  be  attacked  in  a 
collateral  proceeding.    An  order  to  sell  all  the  real  estate  of  an  intestate  to 
pay  debts,  when  the  sale  of  a  small  portion  would  have  been  sufficient,  can 
not  be  set  aside  in  a  collateral  proceeding.        .         ....        148 

To  the  same  point,  see  EXECUTOR'S  PURCHASE  OF  TRUST  ESTATE. 

ADMINISTRATOR— WHEN  NOT  CHARGEABLE  AS  TRUSTEE : 

1.  The  law  is  well  settled,  that  a  person  occupying  the  position  of  a  fiduciary 
can  not  be  a  purchaser  of  the  trust  property,  even  in  the  absence  of  any 
ground  for  the  presumption  of  actual  fraud.     Sharkley  v.  Taylor,  1  Bond's  Ct. 
Ct.  142, 373 

2.  Where  three  persons  were  administrators  of  an  insolvent  estate,  and  had 
obtained  an  order  for  sale  of  defendant's  land  to  pay  debts,  and  at  the  sale 
a  note  was  taken  for  a  part  of  the  purchase-money,  payable  to  the  adminis- 
trators, upon  which  suit  was  brought,  judgment  obtained,  the  property  of- 
fered for  sale,  and  one  of  the  administrators  became  the  purchaser :  Held, 
that  such  administrator  did  not  occupy  a  fiduciary  relation,  and  that  the 
sheriff's  deed  vested  a  good  title  to  him. — Ib. 


INDEX.  609 

ADMINISTRATOR— WHEN  NOT  CHARGEABLE  AS  TRUSTEE— Continued. 

3.  If  the  purchaser  could  be  viewed  as  a  trustee,  the  creditors  of  the  insolvent 

decedent,  and  not  the  heirs,  would  be  the  proper  persons  to  impeach  the 

sale. — Ib. 
On  settlement  of  his  accounts,  can  not  be  charged  with  profit  on  his  purchase 

of  trust  estate,         ......  „  377 

ADVERSE  POSSESSION: 

Causes  statute  of  limitations  to  run,      .        ...       ,  » 249 

To  the  same  point,  see  TRUSTEE  UNDER  WILL,  4;  AGENT,  7.    See  POSSESSION. 

AGENTS: 

Are  trustees, n>48  49 

Doing  equity  are  entitled  to  equity, n.189 

1.  CONVERSION  OP  TRUST  FUND.— In  cases  of  trust,  where  the  trustee  has  vio- 
lated his  trust  by  an  illegal  conversion  of  the  trust  property,  the  cestui  que 
trust  has  a  right  to  follow  the  property  into  whosesoever  hands  he  may  find 
it,  not  being  a  bona  fide  purchaser  for  a  valuable  consideration,  without  no- 
tice.    Oliver  v.  Piatt,  3  How.  333, 18 

2.  Where  a  trustee  has,  in  violation  of  his  trust,  invested  the  trust  property,  or 
its  proceeds,  in  any  other  property,  the  cestui  que  trust  has  his  option,  either  to 
hold  the  substituted  property  liable  to  the  original  trust,  or  to  hold  the  trus- 
tee himself  personally  liable.    The  option  belongs  to  the  cestui  que  trust 
alone,  and  not  the  trustee. — Ib. 

3.  OPTION  OP  BENEFICIARY. — If  the  trustee,  after  such  an  unlawful  conver- 
sion of  the  trust  property,  should  repurchase  it,  the  cestui  que  trust  may,  at 
his  option,  either  hold  the  original  property  subject  to  the  trust,  or  take  the 
substituted  property.     The  trustee,  in  such  case,  has  no  right  to  insist  that 
the  trust  shall,  upon  the  repurchase,  attach  exclusively  to  the  original  trust 
property. — 76. 

4.  Where  the  trust  property  has  been  unlawfully  invested,  with  other  funds  of 
the  trustee  in  other  property,  the  latter,  in  the  hands  of  the  trustee,  is 
chargeable  pro  tanto  to  the  amount  or  value  of  the  original  trust  prop- 
erty,          19 

5.  «NOTICE. — What  constitutes  notice  of  a  trust  ? — Ib. 

6.  An  agent,  employed  by  a  trustee  in  the  management  of  the  trust  property, 
and  who  thereby  acquires  a  knowledge  of  the  trust,  is,  if  he  afterward  be- 
comes possessed  of  the  trust  property,  bound  by  the  trust,  in  the  same 
manner  as  the  trustee. — Ib. 

7.  LAPSE  OP  TIME. — Lapse  of  time  is  no  bar  to  a  subsisting  trust  in  real  prop- 
erty.    The  bar  does  not  begin  to  run  until  knowledge  of  some  overt  act  of 
an  adverse  claim  set  up  by  the  trustee  is  brought  home  to  the  cestui  que  trust. 
The  lapse  of  any  period  less  than  twenty  years  will  not  bar  in  equity,  al- 
though he  may  have  been  guilty  of  some  negligence,  where  the  suit  is 
against  his  trustee,  who  is  guilty  of  the  breach  of  trust,  or  others  claiming 
under  him  with  notice. — Ib. 

8.  There  can  be  no  disseisin  of  a  trust,  though  the  exercise  of  an  adverse  pos- 
session  for  a  great  length  of  time  may  in  equity  bar  or  extinguish  it.    Ba- 
ker v.  Whiting,  3  Sumner,  475, 

9.  A  purchase  by  an  agent  will  be  deemed,  by  a  court  of  equity,  a  purchase 
for  his  principals,  unless  the  agent  has  openly  and  notoriously,  and  with  full 
notice  to  his  principals,  discharged  himself  from  his  agency.— Ib. 

39 


610  INDEX. 


AGENTS — Continued. 

10.  A  tenant  in  common  can  not,  without  the  consent  of  his  co-tenants,  grant 
permits  to  persons  to  go  on  the  premises  owned  in  common,  and  to  cut 
down  timber  thereon  for  their  own  use,  for  a  compensation. — Ib. 

11.  All  acts  done  by  one  tenant  in  common,  are  to  be  done  for  the  interest  of  all 
the  co-tenants,  and  in  conformity  to  their  rights,  until  an  adverse  claim  is 
notoriously  set  up. — Ib. 

12.  ACCOUNT. — Stimpson  gave  a  deed  of  release  of  his  interest,  as  a  tenant  in 
common,  to  Baker.    At  the  time  of  this  conveyance,  Whiting  was  in  pos- 
session and  seized  of  the  premises,  claiming  them  in  his  own  right,  by  vir- 
tue of  a  purchase  under  a  tax  sale.    Whiting  was  one  of  the  tenants  in 
common,  and  the  agent  of  Stimpson  and  the  other  proprietors.     Held,  that 
the  purchase  of  Whiting  must  be  deemed  a  trust  for  the  benefit  of  Stimp- 
son  and  Baker,  to  the  extent  of  their  interests ;  that  he  ought  to  be  decreed 
to  convey  the  legal  title  to  the  premises,  after  being  satisfied  in  all  just  claims 
which  he  had  against  them  for  taxes,  the  purchase  in  the  tax  sale,  his  ex- 
penditures and  improvements,  and  also  for  his  services  as  agent,  deducting 
all  sums  of  money  received. — Ib. 

13.  In  equity,  length  of  time  is  no  bar  to  a  trust  clearly  established ;  provided 
no  circumstances  exist  to  raise  a  presumption  from  lapse  of  time  of  an  ex- 
tinguishment of  the  trust,  and  no  open  denial  or  repudiation*  of  the  trust 
is  brought  home  to  the  knowledge  of  the  parties  in  interest,  which  requires 
them  to  act  as  upon  an  adverse  title,        .        ,        ..  .        .        137 

14.  When  a  person  purchases  property  as  the  agent  of  another,  though  he  may 
have  the  deed  or  contract  of  sale  made  out  in  his  own  name,  the  principal 
acquires  an  equitable  title  thereto,  subject  to  all  the  incidents  attaching  to 
such  an  estate,  and  the  agent  holds  it  in  trust  for  the  principal.     Follansbe 
v.  Kilbreth,  17  Illinois,  522,       - 180 

15.  ELECTION. — An  equitable  title  derived  under  such  circumstances,  may  be 
divested  out  of  the  cestui  que  trust  otherwise  than  by  alienation,  before 
the  trust  is  actually  performed,  as  was  decided  to  have  been  done  in  this 
case. — Ib. 

16.  If  a  cestui  que  trust  discovers  facts  which  would  give  him  a  right  to  repudiate 
the  acts  of  his  trustee,  and  has  investigated  them,  or  had  a  reasonable  time 
to  do  so,  he  is  bound  to  declare  whether  he  will  avail  himself  of  the  right 
or  not,  and  can  not  lie  by  in  a  position  to  affirm  the  bargain,  if  a  profitable 
one,  and  repudiate  it  if  a  losing  one. — Ib. 

17.  Where  a  cestui  que  trust,  having  a  right  to  repudiate  a  transaction,  laid  by  for 
three  years,  and  suffered  his  trustee  to  go  on  and  make  payments  for  the 

property :  Held,  he  was  not  entitled  to  relief, 181 

18.  A  trust  was  created  by  purchasing  land  on  execution,  upon  a  verbal  agreement  be- 
tween the  owner  and  the  purchaser  that  the  purchaser  would  hold  the  land  as 
security  for  the  money  advanced  and  interest,  and  that  the  owner  should 
have  the  right  to  redeem.     Williams  v.  Williams,  8  Bush,  241,         .        407 

19.  Acquiring  and  holding  the  legal  title  to  land  by  purchasing  at  execution 
and  otherwise,  under  a  verbal  agreement,  that  the  land  and  title  should  be 
held  as  a  security  for  moneys  advanced  and  interest,  and  that  the  owner 
should  have  the  right  to  redeem  the  land,  created  a  trust. — Ib. 

20.  The  purchaser  held  the  legal  title  to  the  land  about  fifteen  years  before  the 
suit  was  brought  in  which  the  trust  was  established.     See  opinion,  for  a  full 
statement  of  the  facts  and  evidence  establishing  a  trust. — Ib. 


INDEX.  611 

AGENTS —  Continued. 

21.  Time  for  redeeming  land  sold  under  execution  extended  beyond  one  year 
by  purchaser,  he  is  entitled  to  ten  per  cent  interest  for  one  year  only.  In 
such  case,  interest  should  be  calculated  at  ten  per  cent  per  annum  for  one 
year,  and,  after  adding  that  to  the  principal,  interest  thereafter  at  the  rate 

of  six  per  cent, 408 

See  TRUSTEE— Ex  MALEFICIO  ;  ESTOPPEL,  5. 

ATTORNEY : 

1.  The  creditor  in  an  execution  may  claim  the  benefit  of  a  purchase  made  by 
his  attorney,  especially  if  the  whole  debt  is  not  paid.    But  he  must  assert 
his  right  in  a  reasonable  time.     Wade  \.  Pettibone,  11  Ohio,  57,        .        190 

2.  FRAUD  BY  ATTORNEY  OF  BOTH  PARTIES. — Where  money  is  intrusted  by  A 
to  his  solicitor  for  investment,  but  without  any  particular  investment  being 
then  in  contemplation,  and  it  is  allowed  to  remain  in  the  hands  of  the  so- 
licitor, the  amount  becomes  a  debt  due  from  the  solicitor  to  A.     If  the 
solicitor  afterward  misapplies  the  money,  and  to  cover  his  fraud  obtains 
from  another  client,  B,  upon  a  false  representation,  a  transfer  of  B's  equita- 
ble interest  under  a  previously  executed  mortgage,  no  money  of  A  being 
then  paid  to  B,  the  transfer  thus  obtained  may,  on  B's  discovering  the 
fraud,  be  set  aside  in  equity ;  for  no  money  of  A  having  been  received  by  B 
at  the  time  the  transfer  was  executed,  no  interest  passed  to  A  by  its  execu- 
tion.    Wall  v.  Cockerett,  10  House  of  Lords  Cases,  229,        ...     388 

3.  What  circumstances  may  constitute  acquiescence  of  B  in  the  solicitor's 
fraud,  and  deprive  him  of  the  right  to  relief. — Ib. 

Are  trustees, "-^ 

Sales  at  auction  are  not  exempt  from  equitable  rule,        ...         ".  179 
To  the  same  point,  see  Davoue  v.  Fanning,  1. 
See  CONFIRMATION  ;  ELECTION. 

BANKRUPTS: 
Commissioners  and  Assignees  in  bankruptcy  are  trustees,    .        .        .       «-19 

BEQUESTS: 

See  CHARITABLE  BEQUESTS. 

BROKER: 
See  CLERK,  1,  3. 

CESTUI  QUE  TRUST: 

His  relation  to  trustee.    See  AGENTS,  15,  16, 17. 

Disaffirmance  of  purchase  by  trustee.    See  ADMINISTRATORS'  PURCHASE  o 
TRUST  ESTATE,  5. 

1    The  old  cases  with  regard  to  maintenance  and  champerty  go  further  than 
would  now  be  sustained  in  courts  of  equity.     A  cestui  que  trust  may  lawfully 
dispose  of  his  trust  estate,  notwithstanding  his  title  is  contested  by  t] 
trustee.     Baker  v.  Whiting,  3  Sumner,  475, 

To  the  same  point,  see  ADMINISTRATORS'  PURCHASE  OF  TRUST  ESTATE,  1^ 

When  he  will  be  compelled  to  elect, 

See  AGENTS,  1,  2,  3,  7.    See  CONFIRMATION  BY  CESTUI  QUE  TRUST,  1,  2. 

CHAMPERTY: 

See  CESTUI  QUE  TRUST,  1. 

CHARITABLE  BEQUESTS:  2JO 

Power  of  Corporation  to  take,          .        •        •      .  •        • 


612  INDEX. 

CHARITABLE  BEQUESTS — Continued. 

Are  to  receive  the  most  liberal  construction, n.213 

Where  not  void  for  uncertainty, n.344 

See  CORPORATION,  4,  5,  11. 

1.  A  bequest  for  charitable  uses,  where  the  objects  are  sufficiently  denned,  and 
the  person  designated  as  trustee  acquires  a  capacity  to  hold  by  subsequent 
act  of  incorporation,  takes  effect  as  an  executory  devise.     The  M'Intire  Will 
Case,  9  Ohio,  203, 206 

2.  CORPORATION. — The  corporation  of  the  city  of  Philadelphia  has  power,  un- 
der its  charter,  to  take  real  and  personal  estate  by  deed,  and  also  by  devise. 
Vidalv.  Girard  (Girard  Will  Case),  2  How.  127,  .        .        .        .214 

3.  HOLDING  TRUST  PROPERTY. — Where  a  corporation  has  this  power,  it  may 
also  take  and  hold  property  in  trust  in  the  same  manner  and  to  the  same 
extent  that  a  private  person  may  do.    If  the  trust  be  repugnant  to  the 
proper  purpose  for  which  the  corporation  was  created,  it  may  not  be  com- 

^  pellable  to  execute  it,  but  the  trust  (if  otherwise  unexceptionable)  will  not 
be  void,  and  a  court  of  equity  will  appoint  a  new  trustee.  Neither  is  there 
any  positive  objection  to  a  corporation  taking  property  upon  a  trust  not 
strictly  within  the  scope  of  the  direct  purposes  of  its  institution,  but  col- 
lateral to  them. — 76. 

4.  WHAT  POWERS  INCLUDE  CHARITIES. — Under  the  general  power  "  for  the 
suppression  of  vice  and  immorality,  the  advancement  of  the  public  health 
and  order,  and  the  promotion  of  trade,  industry,  and  happiness,"  the  cor- 
poration may  execute  any  trust  germane  to  those  objects.    The  charter  of 
the  city  invests  the  corporation  with  power  to  take  property  upon  trust  for 
charitable  purposes,  which  are  not  otherwise  obnoxious  to  legal  animad- 
version.— Ib. 

5.  LEGISLATIVE  ESTOPPEL. — The  two  acts  of  March  and  April,  1832,  passed 
by  the  Legislature,  are  a  legislative  interpretation  of  the  charter  of  Phila- 
delphia, and  would  estop  the  Legislature  from  contesting  the  competency 
of  the  corporation  to  take  the  property  and  execute  the  trust. — Ib. 

6.  CAN  NOT  FAIL  FOR  WANT  OF  TRUSTEE. — If  the  trusts  were  in  themselves 
valid,  but  the  corporation  incompetent  to  execute  them,  the  heirs  of  the 
deviser  could  not  take  advantage  of  such  inability.    It  could  only  be  done 
by  the  State  in  its  sovereign  capacity. — Ib. 

7.  WHAT  ARE  CHARITIES. — The  trusts  mentioned  in  the  will  of  Stephen  Gi- 
rard are  charitable  uses,  in  a  judicial  sense.    Donations  for  the  establish- 
ment of  colleges,  schools,  and  seminaries  of  learning,  and  especially  such 
as  are  for  the  education  of  orphans  and  poor  scholars,  are  charities  in  the 
sense  of  the  common  law. — 76. 

8.  CHANCERY  SUSTAINS  CHARITIES  WITHOUT  STATUTORY  AID. — The  decision  of 
the  Supreme  Court  of  Pennsylvania,  in  the  case  of  Zimmerman  v.  Andres, 
recognized  and  eonfirmed,  viz:  "That  the  conservative  provisions  of  the 
statute  of  43  Elizabeth,  chap.  4,  have  been  in  force  in  Pennsylvania,  by 
common  usage  and  constitutional  recognition,  and  not  only  these,  but  the 
more  extensive  range  of  charitable  uses  which  chancery  supported  before 
the  statute  and  beyond  it, 215 

9.  The  present  case  distinguished  from  the  case  in  4  Wheaton,  1,  upon  two 
grounds,  viz:  1.  That  the  case  in  Wheaton  arose  under  the  law  of  Virginia, 
in  which  the  statute  of  43  Elizabeth,  chap.  4,  had  been  abolished.    2.  That 
the  donees  were  an  unincorporated  association  which  had  no  legal  capacity 


INDEX.  613 

CH  ABIT  ABLE  BEQUESTS —  Continued. 

to  take  and  hold  the  donation,  and  the  beneficiaries  were  also  uncertain  and 
indefinite. — Ib. 

10.  JURISDICTION  OF  CHARITIES —The  decisions  and  publication  of  the  Record 
Commissioners,  in  England,  examined  as  to  the  jurisdiction  of  chancery 
over  charitable  devises  anterior  to  the  statute  of  43  Elizabeth.    This  part 
of  the  common  law  was  in  force  in  Pennsylvania,  although  no  court  having 
equity  powers  existed  capable  of  enforcing  such  trusts.— 76. 

11.  WHAT  DEVISES  ARE  NOT  CONTRARY  TO  CHRISTIANITY.— The  exclusion  of 
all  ecclesiastics,  missionaries,  and  ministers  of  any  sort  from  holding  or  ex- 
ercising any  station  or  duty  in  a  college,  or  even  visiting  the  same,  or  the 
limitation  of  the  instruction  to  be  given  to  the  scholars  to  pure  morality, 
general  benevolence,  a  love  of  truth,  sobriety,  and  industry,  are  not  so  de- 
rogatory and  hostile  to  the  Christian  religion  as  to  make  a  devise  for  the 
foundation  of  such  a  college  void,  according  to  the  constitution  and  laws  of 
Pennsylvania. — Ib. 

12.  EIGHT  OF  HEIRS  TO  QUESTION  BEQUESTS.— Where  a  testator  devises  the  in- 
come of  property  in  trust  primarily  for  one  object,  and  if  the  income  is 
greater  than  the  object  needs,  the  surplus  to  others,  a  bill  in  the  nature  of 
a  bill  quia  timit,  and  in  anticipation  of  an  incapacity  in  the  trusts  to  be  ex- 
ecuted hereafter,  and  when  a  surplus  arises  (there  being  no  surplus,  nor  the     v 
prospect  of  any),  will  not  lie  by  heirs  at  law  (supposing  them  otherwise 
entitled,  which  here  they  were  decided  not  to  be),  to  have  this  surplus  ap- 
propriated to  them  on  the  ground  of  the  secondary  trusts  having,  subse- 

•    quently  to  the  testator's  death,  become  incapable  of  execution.     Girard  v. 
Philadelphia,  7  Wallace,  1  (Girard  WHl  Case,  No.  2),          .        .        .        238 

13.  IDENTITY  OF  MUNICIPAL,  CORPORATION. — Neither  the  identity  of  a  munici- 
pal corporation,  nor  its  right  to  hold  property  devised  to  it,  is  destroyed  by 
a  change  of  name,  an  enlargement  of  its  area,  or  an  increase  in  the  number 
of  its  corporators.     And  these  are  changes  which  the  Legislature  has  power 
to  make. — Ib. 

14.  RES  ADJUDICATA. — Under  the  will  of  Stephen  Girard  [for  the  terms  of 
which  see  Vidal  v.  Girard,  herein,  page  214],  the  whole  final  residuary  of 
his  estate  was  left  to  the  old  city  of  Philadelphia  in  trust  to  apply  the  in- 
come, 1.  For  the  maintenance  and  improvement  of  thu  college  as  a  primary 
object ;  and  after  that,  2.  To  improve  its  police ;  3.  To  improve  the  city 
property  and  the  appearance  of  the  city,  and  to  diminish  the  burden  of 
taxation,  the  court  having  declared  that  so  long  as  any  portion  of  the  in-        / 
come  should  be  found  necessary  for  improvement  and  maintenance  of  the 
college,  the  second  and  third  objects  could  claim  nothing,  and  the  whole 
income  being,  in  fact,  necessary  for  the  college.    Held,  1.  That  no  question 
arose  as  to  whether  the  new  city  should  apply  the  surplus  under  the  trusts 

for  the  secondary  objects  to  the  benefit  of  the  new  city,  or  to  that  portion 
of  it  alone  embraced  in  the  limits  of  the  old  one  ;  2.  That  whether  or  not 
the  trusts  being,  as  was  decided  in  Vidal  v.  Girard  [page  214],  in  themselves 
valid,  Girard's  heirs  could  not  contest  the  right  of  the  city  to  take  the 
property  or  to  execute  the  trusts,  this  right  belonging  to  the  State  alone  as 
parens  patrice. — Ib. 

15.  TRUSTS  FOR  CHARITIES.— By  deeds  executed  in  1704,  Lady  Hewley  con- 
veyed estates,  upon  trust  to  pay  out  of  the  rents  such  sums,  yearly  or  other- 
wise, to  such  poor  and  godly  preachers  for  the  time  being  of  Christ's  holy 


614  INDEX. 


CHARITABLE  BEQUESTS — Continued. 

Gospel,  and  to  such  poor  and  godly  widows  for  the  time  being  of  poor  and 
godly  preachers  of  Christ's  holy  Gospel,  as  the  trustees  for  the  time  being 
should  think  fit,  etc.,  and  to  dispose  of  the  remainder  of  the  said  rents  in 
relieving  such  godly  persons  in  distress,  being  fit  objects  of  her  and  the 
trustees'  charity,  as  the  trustees  for  the  time  being  should  think  fit;  and  she 
directed,  that  when  any  one  of  the  trustees  should  die,  the  survivors  should 
elect  in  his  place  such  a  person  as  they  in  their  judgments  and  consciences 
should  think  fit  to  be  a  trustee.  Shore  v.  Wilson  (Lady  Hewley's  Trusts),  9 
Clarke  &  Finnelly,  355, 450 

16.  PROTESTANT  DISSENTERS. — By  other  deeds  executed  in  1707,  Lady  Hewley 
conveyed  other  estates  to  the  same  trustees,  partly  for  the  support  of  poor 
old  people  in  an  alms-house,  for  the  management  of  which  she  appointed 
other  trustees;  and,  after  directing  that  the  trustees  should  observe  the 
rules  which  she  should  leave  for  the  selection  and  government  of  the  poor 
people  therein,  she  ordered  the  residue  to  be  applied  upon  trusts,  which 
were  the  same  as  those  contained  in  the  deeds  of  1704.     By  the  rules  left 
by  her,  she  ordered  that  none  be  admitted  but  such  as  should  be  poor  and 
piously  disposed,  and  of  the  Protestant  religion,  and  able  Jto  repeat  by  heart 
the  Lord's  Prayer,  the  Creed,  the  Ten  Commandments,  and  Bowles's  Cat- 
echism,       .     •  •**..    .4  -•••    -*M  v  j  •     *••  • .  -  .  ••  '•'••-,-  ••  ...        .        .       451 

17.  UNITARIAN. — At  the  dates  of  the  deeds,  all  religious  sects  tolerated  by  law 
believed  in  the  Trinity;  but  in  the  course  of  time  the  estates  became  vested 
in  trustees  of  whom  the  majority  were  Unitarians,  and  they  applied  the 
rents  for  the  benefit  of  Unitarians ;  and  that  sect  became  tolerated  by  law. 
Held,  that  neither  Unitarians  nor  members  of  the  Church  of  England,  but 
Protestant  Dissenters  only,  are  entitled  to  the  benefit  of  the  charities,  and 
that  all  the  trustees  were  properly  removed,  as  all  concurred  in  the  misap- 
plication of  the  charity. — Ib. 

18  EXTRINSIC  EVIDENCE  IN  CONSTRUCTION  OF  DEEDS. — Held,  that  for  the  pur- 
pose of  determining  the  objects  of  Lady  Hewley's  charity,  under  the  terms, 
"  godly  preachers  of  Christ's  holy  Gospel,"  "godly  persons,"  and  the  other 
descriptions  contained  in  her  deeds,  extrinsic  evidence  is  admissible  to 
show  the  existence  of  a  religious  party  by  whom  that  phraseology  was 
used,  and  the  manner  in  which  it  was  used,  and  that  she  was  a  member 
of  that  party. — Ib. 

19.  A  decree  declaring  that  certain  persons  are  not  entitled  thereto,  is  not 
defective  for  not  also  declaring  who  are  entitled. — Ib. 

CHUKCH  PROPERTY: 

1.  CHANGE  OF  TRUST. — A  court  of  equity  has  jurisdiction  to  decree  a  sale  of 
property  held  in  trust  for  charitable  or  religious   purposes  when,  in  its 
opinion,  the  objects  of  the  trust  would  be  more  effectually  carried  out  by 
such  sale.     Wensinger  v.  AUemany,  40  California,  288,         .         .         .    .    345 

2.  PRACTICE — UNDER  WHAT  TERMS  IT  WILL  BE  MADE.— It  should  require 
from  the  trustee  a  bond,  with  sufficient  security  to  be  approved  by  the 
court,  for  the  proper  application  of  the  proceeds  of  the  sale  to  the  pur- 
poses of  the  trust,  according  to  the  directions  of  the  decree,  and  reserv- 
ing the  authority  of  the  court,  upon  proper  showing,  to  require  additional 
security,  or  to  appoint  another  trustee,  if  circumstances  make  it  neces- 
sary.— Ib. 


INDEX.  615 

CHURCH  PROPERTY — Continued. 

3.  COSTS. — The  costs,  including  reasonable  fees  to  counsel,  are  a  proper  charge 
on  the  trust  fund,  and  should  be  allowed  by  the  court. — Ib. 

4.  LIABILITY  OF  TRUSTEES. — Title  to  property  of  religious  corporations,  by 
the  Constitution  of  Kansas,  vests  in  the  trustees ;  and  trustees  of  such  cor- 
porations  can  not  bind   the  corporation  by  their  covenant,  unless  duly 
authorized.     Klopp  v.  Moore,  6  Kansas,  27, 369 

5.  When  the  trustees  of  a  church,  organized  under  the  laws  of  Kansas,  in 
making  a  deed  of  real  estate,  covenant  to  warrant  and  defend  the  same, 
without  showing  that  authority  had  been  given  them  by  the  corporation 
for  the  making  of  such  covenant,  and  without  expressly  excluding  personal 
liability :  Held,  that  they  are  personally  liable  on  such  covenant. — Ib. 

See  DEDICATION  TO  PUBLIC  USES,  1,  2,  3. 

CIVIL  LAW: 
On  trusts, 16,  53,  54,  55,  80 

See  EXECUTORS'  PURCHASE  OF  TRUST  PROPERTY,  7,  8. 

CLEEK: 

1 .  The  clerk  of  a  broker  to  make  sale  of  land,  who  has  access  to  the  corre- 
spondence between  his  principal  and  the  vendor,  stands  in  such  a  relation 
of  confidence  to  the  latter,  that  if  he  becomes  the  purchaser,  he  is  charge- 
able as  trustee  for  the  vendor,  and  must  reconvey  or  account  for  the  value 
of  the  land.     Gardner  v.  Ogden,  22  New  York,  327,     .        .        .        .115 

2.  PRACTICE. — The  vendor  can  not  unite  in  the  same  action  a  claim  against 
the  broker  for  damages  for  having  fraudulently  sold  the  land,  with  a  claim 
against  the  purchaser  for  a  reconveyance  or  accounting. — 76. 

3.  CLERK  LIABLE. — The  clerk  held  to  reconvey  so  much  of  the  land  as  re- 
mained in  his  hands,  and  to  account  for  the  proceeds  of  what  he  had  sold, 
although  the  price  paid  by  him  upon  the  purchase  was  fair  and  adequate, 
and  the  broker  was  exonerated  from  fraud. — Ib. 

COLLATEKAL  PROCEEDINGS: 

When  sale  can  be  impeached  by.    See  ADMINISTRATOR'S  PURCHASE  OF  TRUST 
ESTATE,  4,  5. 

COMMON  LAW: 
Presumptions  in  favor.    See  RESULTING  TRUSTS,  13. 

CONDITIONAL  SALE: 
Difference  between,  and  mortgage.    See  RESULTING  TRUSTS,  9,  10,  11,  12. 

CONFIRMATION  BY  CESTUI  QUE  TRUST : 

1.  Purchaser  at  decretal  sale  induced  persons  not  to  bid  against  him  by  giving 
assurance  that,  on  the  return  of  the  absent  owner,  he  would  let  him  repur- 
chase at  the  price  given.  Held,  that  if  the  absent  owner,  on  returning  home, 
had  sought,  within  a  reasonable  time,  a  resale  of  the  property  to  him,  and 
the  latter  had  refused  compliance,  the  court  would  regard  him  as  having 
held  the  property  in  trust,  and  liable  to  account  for  the  difference  between 
the  price  paid  and  the  amount  for  which  he  afterward  sold  the  property. 
Roach  v.  Hudson,  8  Bush,  410,     .-..•- 

2.  PURCHASER  WAS  ABSOLVED  FROM  THE  TRUST.— After  the  original  owner's 
return,  the  purchaser,  in  good  faith,  offered  to  let  him  repurchase  the  prop- 
erty by  paying  only  what  it  had  cost,  including  improvements,  and  not 


616  INDEX. 

CONFIRMATION  BY  CESTUI  QUE  TRUST — Continued. 

objecting  to  the  proposition  as  unfair,  or  variant  from  the  assurance  given 
when  the  purchase  was  made,  the  original  owner  declined  the  privilege  of 
repurchasing :  Held,  that  the  original  owner  absolved  the  purchaser  from 
any  trust  which  devolved  on  him  by  his  promise,  and  left  the  purchaser  free 
to  keep  or  dispose  of  the  property  as  his  own,  without  responsibility  to  the 
original  owner. — Ib. 
Subject  of  a  binding  confirmation  considered,  .  .  .  w.189,  «.202 

A  doubted  case  of  confirmation, «.202,  «.204 

Question  fully  considered  in  4  Dessaus.  S.  C.  K.  702,         .        .        .         ».204 
See  FoUansbe  v.  Kiibreth,  180 ;   Wade  v.  Pettibone,  190,  to  the  same  point.     Also, 

Ho/man  Coal  Co.  v.  Cumberland  Coal  Co.,  87,  and  notes  38,  72,  98. 
When  deed  of  release  no  confirmation.    See  ACCOUNTS,  1. 
When  election  is  binding.    See  AGENTS,  15, 16,  17. 

CONTRARY  TO  PUBLIC  POLICY: 
When  acts  void.    See  CORPORATION,  9. 

CONVERSION: 
Effect  of  conversion  of  life  estate.    See  TRUSTEE  UNDER  WILL,  1,  2,  3,  4. 

CONVEYANCE: 

1.  A  warranty,  either  lineal  or  collateral,  is  no  bar  to  an  heir  who  does  not 
claim  the  property  to  which  the  warranty  is  attached  by  descent,  but  as  a 
purchaser  thereof.     Oliver  v.  Piatt,  3  How.  333,          ....        19 

2.  A  deed  of  release,  and  intended  to  convey  all  the  party's  right  and  title,  if 
it  can  not  take  effect  as  a  release,  may  be  construed  as  a  sale,  or  other 
appropriate  conveyance.    Baker  v.  Whiting,  3  Sumner  C.  C.  475,        .     136 

Difference  between  conditional  sale  and  mortgage.    See  RESULTING  TRUST,  9 

to  12. 
Trustee  bound  individually.    See  CHURCH  PROPERTY,  4,  5. 

When  deed  absolute  will  be  held  a  mortgage, 8.425 

See  PURCHASE — with  notice,  3. 

CORPORATION : 

1.  PROPERTY  OF  CORPORATION  A  TRUST  FUND. — As  a  general  rule,  the  property 
of  a  corporation  is  a  trust  fund  for  the  benefit  of  its  creditors  and  stockhold- 
ers, and  they  may,  in  all  cases  where  it  has  been  fraudulently  or  wrongfully 
disposed  of  by  the  directors,  pursue  it  into  the  hands  of  purchasers  with 
notice,  and  assert  their  lien  upon  it,  or  their  claims  for  its  value.     Goodin  v. 
Whitewater  Canal  Co.,  18  Ohio,  169, 125 

2.  WRONGFUL  CONVERSION  OF  THE  TRUST  FUND. — A  railroad  company,  having 
purchased  a  majority  of  the  stock  in  a  canal  company,  elected  for  the  latter 
a  board  of  directors  who  were  in  the  interest  of  the  railroad  company,  and 
with  the  assent  of  Said  board,  appropriated  the  entire  canal  as  a  railroad- 
track,  paying  therefor  a  price  which  was  agreed  upon  by  the  directors  of 
the  two  companies,  but  which  was  far  below  the  actual  value.    Held,  that 
although  the  stockholders  and  creditors  of  the  canal  company  can  not,  after 
the  road  has  been  completed,  reclaim  the  property,  or  enjoin  its -use,  yet 
they  are  not  concluded  by  such  agreement,  as  regards  the  price  j»f  the  prop- 
erty, but  may  compel  the  railroad  company  to  account  for  its  additional 
value. — Ib. 

3.  RULE  OF  DAMAGES. — The  rule  of  valuation  in  such  cases  is,  what  the 


INDEX.  617 

• 
CORPORATION — Continued. 

interest  of  the  canal  company  was  worth,  not  for  canal  purposes  merely,  or 
for  any  other  particular  use,  but  what  it  was  worth  generally,  for  any  and 
all  uses  for  which  it  might  be  suitable. — Ib. 

4.  STOCKHOLDERS. — A  corporation  being  a  defendant  to  a  suit  in  equity,  which 
seeks  to  have  it  declared  null,  the  holders  of  stock  in  it  are  not  proper  par- 
ties to  defend  the  suit.     In  such  a  case,  the  holders  of  the  stock  claiming 
that  if  the  corporation  is  annulled,  they  have  equitable  interests  in  the 
property,  may  be  admitted  as  parties  defendants  to  protect  their  interests. 
Washington,  Alexandria  and  Georgetown  Railroad  Co.  v.  Alexandria  and  Washing- 
ton Railroad  Co.,  19  Grattan,  592, 268 

5.  WHEN  SUIT  CAN  BE  REMOVED  TO  U.  S.  COURT. — The  plaintiff  and  defendant 
corporations  being  of  the  same   State,  the  owners  of  the  stock,  though 
non-residents,  are  not  entitled  to  have  the  cause  removed  to  the  United 
States   Court  to   have  the   question   of   the   validity  of  the   corporation 
decided, 269 

6.  NEW  TRUSTEE — WHEN  APPOINTMENT  ILLEGAL. — A  railroad  company  make 
a  deed  on  their  property  to  secure  certain  bonds ;  and  it  provides  that  if 
the  trustee  becomes  incapable  of  acting,  any  court  of  record  of  Alexandria 
County,  upon  the  application  of  three-fifths  of  the  holders  of  the  bonds, 
upon  notice  to  the  president  or  any  director  of  the  company,  may  appoint 
another  trustee.     The  trustee,  president,  and  directors  go  into  the  enemy's 
lines,  and  remain  during  the  war.     An  order  substituting  another  person 
as  trustee,  without  notice,  is  null  and  void  ;  and  a  sale  made  by  suck  sub- 
stituted trustee  is  utterly  null. — Ib. 

I.  TRUSTEE  CAN  NOT  SELL  TO  HIMSELF. — A  trustee  in  a  deed  to  secure  debts, 
who  is  the  attorney  in  fact  and  law  of  the  creditor,  can  not  make  a  valid 
sale  at  auction  of  the  property  to  himself. — 16. 

8.  IXCUMBRANCES  MUST  BE  FIXED  BEFORE  THE  SALE.— Where  there  are  va- 
rious incumbrances  on  property,  and  the  priorities  are  not  ascertained,  a 
sale  by  a  trustee  under  one  of  the  deeds  is  improper.— 76. 

9.  PUBLIC  POLICY — ESTOPPEL. — An  agreement  was  made  between  the  Pacific 
Mail  Steamship  Company  and  the  Accessory  Transit  Company,  by  which 
the  former  company  was  to  pay  to  the  latter  a  certain  sum  per  trip  or  per 
month,  so  long  as  the  boats  of  the  Pacific  Company  should  run  without 
opposition.     Held,  that  a  court  would  not  enforce  it  against  the  delinquent 
party.     Yet,  that  the  rule  did  not  apply  to  an  action  by  one  of  the  princi- 
pals in  such  a  contract  against  its  agent  who  had  received  money  thereon. 
Murray  v.  Vanderbilt,  39  Barbour,  440,         .        .        .         .        .        .103 

10.  WHERE  PRESIDENT  is  RELEASED  FROM  HIS  TRUST.— After  a  corporation  has 
virtually  ceased  to  exist,  and  for  all  purposes  of  business  and  for  promoting 
the  objects  of  the  charter,  all  its  powers  have  been  taken  away,  its  property 
all  expended,  and  the  company  hopelessly  insolvent,  it  is  not  improper  for 
the  president  to  enter  into  arrangements  on  his  own  behalf  for  carrying  on 
and  continuing  for  his  own  benefit  the  business  formerly  conducted  by  the 
company  under  an  agreement  not  imposing  any  duty  or  obligation  upon  the 
corporation,  or  involving  any  use  of  its  property,  .  . 
Doubted  as  to  the  correctness  of  the  syllabus  and  equity  of  the  decision,  «.ll 

II.  The  being  president  of  an  insolvent  corporation  will  not  prevent  one  from 
doing  what  the  corporation  has  lost  all  ability  to  do.     After  the  company 
has  virtually  ceased  to  exist,  and  its  powers  have  been  taken  away,  the 

40 


618  INDEX. 

CORPORATION — Continued. 

reason  and  policy  of  the  rule  prohibiting  a  trustee  from  making  agreements 

for  his  own  benefit  ceased  also, «.112 

Doubted.—  Ib. 

12.  FRAUDULENT  SALE. — Where  the  president,  holding  a  mortgage  upon  vessels 
of  the  corporation,  given  to  secure  advances  made,  and  bonds  of  the  company 
held  by  him,  and  authorized  by  the  company  to  sell  the  vessels,  as  its  agent, 
sold  the  same  at  private  sale  to  his  son,  taking  his  note,  payable  in  a  year, 
he  still  keeping  the  control  and  management,  and  rendering  no  account  to 
the  purchaser  for  the  use  of  them  :  Held,  that  such  a  transaction  could  not 
be  upheld,  and  ordered  to  be  set  aside,  and  the  agent  directed  to  account  to 
the  company  for  the  proceeds,  when  subsequently  sold  by  him. — Ib. 

13.  PLACING  SHARES  AT  DISPOSAL  OF  DIRECTORS. — A  general  meeting  of  a  rail- 
way company  placed  shares  in  a  projected  extension  at  the  disposal  of  the 
directors :  Held,  that  the  disposal  was  merely  as  trustees  for  the  company ; 
and  the  chairman  (who  exercised  uncontrolled  authority  in  the  company), 
having  sold  part  of  such  shares  at  a  premium,  was  held  liable  to  account  to 
the  company  for  their  produce,  with  interest.     Held,  a/so,  that  he  could  not 
retain  the  profits  as  a  remuneration  for  his  great  services,  or  on  the  ground 
of  the  acquiescence  of  the  shareholders,  to  be  inferred  ^rom  a  presumed 
knowledge  of  the  share-book.     North  and  York  Midland  Railway  Co.  v.  Hud- 
son, 16  Beavan,  486, .59 

14.  CHAIRMAN. — The  chairman  allotted  a  number  of  the  unappropriated  shares 
4o  his  nominees ;  they  were  sold  at  a  premium,  and  the  produce  received  by 
him.    Held,  that  as  trustee,  he  was  bound  to  the  company  for  the  profit 
made. — Ib. 

15.  SECRET  SERVICE  MONEY. — The  chairman  appropriated  various  unallotted 
shares  to  the  use  of  various  persons,  whose  names  he  did  not  mention,  in 
order  to  secure  or  reward  services  which  he  declined  to  state,  in  the  nature 
of  "secret  service  money."     Held,  that  if  the  defendant  had  applied  the 
property  of  the  company  in  a  manner  which  would  not  bear  the  light,  he 
must  suffer  the  consequences. — Ib. 

16.  WHEN  STOCKHOLDER  CAN  SUE. — The  cases  reviewed,  on  the  question  as  to 
when  a  stockholder  in  a  private  corporation  will  be  allowed  to  file  a  bill  in 
his  own  name,  on  behalf  of  himself  and  all  others  standing  in  the  same 
situation,  making  the  corporation  defendant,  to  compel  the  ministerial  offi- 
cers to  account  for  breach  of  official  duty,  or  misapplication  of  corporate 
funds.     Heath  v.  Erie  Railway  Co.,  8  Blatch.  C.  C.  347,         .        .        .430 

17.  REQUEST  TO  SUE. — Where  the  bill  sets  out  ultra  vires,  in  issuing  shares  of 
stock,  and  breaches  of  trust,  which  are  frauds  on  the  stockholder's,  inas- 
much as  such  acts  and  breaches  of  trust  are  beyond  the  power  of  the  cor- 
poration to  affirm  or  sanction,  it  is  not  necessary  that  the  stockholder  should 
aver  that  he  has  applied  to  the  corporation  or  its  board  of  directors  to 
bring  the  suit,  and  that  they  have  refused,        .         .         .        .        ••-  •    431 

18.  NOTICE. — Where  the  corporation  is  under  the  control  of  the  defendants 
who  must  be  sued,  and  an  excuse  is  given  for  the  bringing  of  the  suit  by 
the  stockholder,  which  is  equivalent  to  a  refusal  by  the  directors,  on  re- 
quest, to  bring  the  suit,  the  suit  may  be  brought  by  the  stockholder,  with- 
out showing  such  request  and  refusal. — 76. 

19.  DISSOLUTION. — The  modes  by  which  a  private  corporation  in  our  country  is 
dissolved,  are,  1.  By  the  death  of  its  members;  2.  Surrender  of  its  fran- 


INDEX.  619 

CORPORATION — Continued. 

chises;  and,  3.  A  judgment  of  forfeiture  for  non-use  or  abuse.     Jtf'Intire 
WiU  Case,  9  Ohio,  203,        ."  -    -.   •    .  **a  a>  yw  ...  207 

20.  A  legislative  act  reciting  that  a  corporation  trustee  had  lost  it*  rights,  and 
authorizing  a  purchase  for  the  State,  of  its  property,  is  a  recognition  of 
its  existence  as  a  corporation  capable  of  contracting. — Ib. 

Land  condemned  for  quasi  public  uses  does  not  revert  on  change  of  use,  «.344 

Where  a  municipal  corporation  can  hold  charitable  bequests.     See  CHARITA- 
BLE BEQUESTS,  1,  2,  3,  4,  9. 

Identity  of  municipal  corporation.    See  CHARITABLE  BEQUESTS,  13. 

See  FRAUD;  FRAUDULENT  SALES ;  STOCKHOLDERS;  PRACTICE. 

COSTS : 
See  CHURCH  PROPERTY,  3. 

COUETS: 

Federal,  follow  practice  in  local  courts.    See  HUSBAND  AND  WIFE,  4. 

-OF  EQUITY: 

Jurisdiction.    See  CHARITABLE  BEQUESTS,  1,  8,  10. 

CREDITORS: 
Property  of  corporation  a  trust  fund  for.    See  CORPORATION,  1 ;  INSOLVENCY,  2. 

DAMAGES: 
Rule  for  computing,  or  for  compensation.    See  CORPORATION,  3. 

DEDICATION  TO  PUBLIC  USES: 

1.  SCHOOL  PROPERTY. — The  village  of  Van  Wert  was  laid  out  in  1835,  and 
the  proprietors  dedicated  two  lots  therein  "for  school  purposes,  and  on 
which  to  erect  school-houses."     By  reason  of  the  subsequent  construction 
of  a  railway,  and  the  location  of  a  depot  in  proximity  to  these  lots,  they 
were  rendered  unsuitable  to  be  used  as  sites  for  school-houses.    A  petition 
Avas  filed  by  the  Board  of  Education  of  the  incorporated  village,  praying 
that  the  court  might  order  the  lots  to  be  sold,  and  the  proceeds  applied  to 
the  purchase  of  suitable  school-house  sites,  or  to  the  erection  of  school- 
houses  on  suitable  grounds  to  be  procured  by  the  Board.    Upon  demurrer  : 
Held,  that  the  dedication  was  for  a  specific  use,  and  conferred  no  power  of 
alienation  so  as  to  extinguish  the  use.     Board  of  Education  v.  Van  Wert,  18 
Ohio  St.  221, 339 

2.  That  if  the  use  created  by  the  dedication  were  abandoned,  or  should  be- 
come impossible   of  execution,  the   premises  would   revert  to   the  dedi- 
cators or  their  representatives,  and  that,  without  their  consent,  they  could 
not  be  divested  of  their   contingent  right  of  diversion  by  an   absolute 
alienation, 340 

3.  EXECUTION  OF  TRUST,  CY  PRES. — The  principle  upon  which  a  trust  may, 
under  certain  circumstances,  be  executed  cy  pres,  is  not  applicable  in  such  a 
case. — 76. 

Legal,  although  party  had  only  an  equitable  title,        ....    «.343 

And  no  party  in  existence  capable  of  taking  the  fee,         .        .        .         «.344 

No  provision  for  forfeiture,  does  not  revert  on  abuse  of  trust. — Ib. 

Where  not  void  for  uncertainty. — Ib. 

Abandonment  necessary  to  cause  reversion,          .        .        .  •    .        •      «.344 


620  INDEX. 

DEDICATION  TO  PUBLIC  USES — Continued. 

No  reversion  takes  place  on  change  of  use. — Ib.     (Quere?) 
Statute  of  limitations  runs  in  regard  to,  when  held  adversely. — 76. 
See  CHURCH  PROPERTY,  1,  2 ;  CORPORATION. 

DIRECTOR: 

1.  The  director  of  a  railroad  company  is  a  trustee;  and,  as  such,  is  precluded 
from  dealing,  on  behalf  of  the  company,  with  himself,  or  with  a  firm  of 
which  he  is  a  partner.     Aberdeen  Railway  Co.  v.  Blaikie,  1  M'Queen,  461,    76 

2.  RULE  GOVERNING  TRUSTEES. — It  is  a  rule  of  universal  application,  that  no 
trustee  shall  be  allowed  to  enter  into  engagements  in  which  he  has,  or  can 
have,  a  personal  interest,  conflicting,  or  which  may  possibly  conflict,  with 
the  interest  of  those  whom  he  is  bound  by  fiduciary  duty  to  protect. — Ib. 

3.  FAIRNESS  NO  EXCEPTION.— So  strictly  is  this  principle  adhered  to,  that  no 
question  is  allowed  to  be  raised  as  to  the  fairness  or  unfairness  of  the  ques- 
tion ;  for  it  is  enough  that  the  parties  interested  object. — Ib. 

4.  It  may  be  that  the  terms  on  which  a  trustee  has  attempted  to  deal  with  the 
trust  estate  are  as  good  as  could  have  been  obtained  from  any  other  quarter. 
They  may  even  be  better.     But  so  inflexible  is  the  rule,  that  no  inquiry 
into  that  matter  is  permitted. — Ib. 

5.  It  makes  no  difference  whether  the  contract  relates  to  real  estate  or  person- 
alty, or  mercantile  transactions  ;  the  disability  arising,  not  from  the  subject- 
matter  of  the  contract,  but  from  the  fiduciary  character  of  the  contracting 
party. — Ib. 

6.  SCOTCH  AND  ROMAN  LAW. — The  law  of  Scotland  and  the  law  of  England 
are  the  same  upon  these  points ;  both  coming  from  the  Roman  law,  itself 
bottomed  in  the  plainest  maxims  of  good  sense  and  equity. — Ib. 

7.  EQUITY  GOVERNS  THE  LAW. — The  rules  which  govern  fiduciary  relations 
are  equitable  rules,  unknown  to  the  English  courts  of  common  law.    Con- 
sequently,  in   a   case   properly   determinable    by   those    equitable   rules, 
the  decision  of  a  court  of  common  law,  when  opposed  to  them,  must  be 
disregarded. — Ib. 

8.  The  great  case  of  the  York  Buildings  Co.  v.  Mackenzie,  decided  by  the  House, 
in  1795,  under  the  advice  of  Lord  THURLOW  and  Lord  LOUGHBOROUGH, 
commented  on — 76. 

9.  PURCHASE  BY  DIRECTOR. — A  director  of  a  corporation,  at  the  time  of  the 
sale  of  part  of  its  property  was  contemplated  and  made,  and  who  actively 
participated   in  all  the  measures  tending  to  its  completion,  and  had  full 
knowledge  of  all  the  circumstances  attending  its  progress,  is  not  competent 
to  become  &  purchaser  of  such  property,  and  the  sale  to  him  can  not  be  up- 
held, if  resisted  by  the  corporation.     Ho/man  Coal  Co.  v.  Cumberland  Coal 
Co.,  16  Maryland,  456, 87 

10.  A  party  joining  in  a  purchase  from  a  corporation,  with  knowledge  of  the 
fact  that  his  co-purchaser  was  a  director  of  the  corporation,  is  affected  with 
whatever  of  legal  disability  belonged  to  the  director  by  reason  of  that 
relation,         .        .  •     .    ; 88 

11.  A  director,  having  purchased  lands  from  a  corporation,  united  with  others 
in  forming  a  new  corporation,  he  subscribing  for  almost  all  of  the  stock 
therein,  and  becoming  one  of  its  officers  and  directors,  and  on  the  next  day, 
in  pursuance  of  one  entire  plan,  conveyed  the  same  lands  to  the  new  com- 
pany in  payment  of  his  subscription  for  said  stock.     Held,  that  the  new 


INDEX.  621 

DIRECTOR — Continued. 

company  is  affected  with  notice  of  the  circumstances  impairing  the  title 
of  the  party  so  conveying  the  lands  to  it,  and  can  not  claim  to  he  a  bonafide 
purchaser  without  notice. — Ib. 

12.  Trustees  can  not  purchase  at  their  own  sales,  either  directly  or  indirectly, 
and  if  they  do,  such  purchase  will  be  set  aside  on  the  proper  and  reasonable 
application  of  the  parties  interested. — Ib. 

13.  THE  RULE  APPLIES  TO  ALL  FIDUCIARIES.— The  same  doctrine  applies  to 
purchases   by  persons  acting   in  any  fiduciary  capacity,  which   imposes 
on  them  the  obligation  of  obtaining  the  best  terms  for  the  vendor,  or  which 
has  enabled  them  to  acquire  a  knowledge  of  the  property.     A  director  of 
a  corporation  holds  such  a  relation  to  its  stockholders. — Ib. 

14.  BATIFICATION. — To  render  the  ratification  of  such  a  sale  conclusive,  the 
principal  must,  at  the  time  of  the  ratification,  be  fully  aware  of  every  ma- 
terial fact,  and  his  act  of  ratification  be  an  independent  substantive  act, 
founded  on  complete  information,  and  he  must  not  only  be  aware  of  the 
facts,  but  apprised  of  the  law  as  to  how  these  facts  would  be  dealt  with  if  brought 
before  a  court  of  equity. — Ib. 

15.  NOTICE. — Where  a  purchaser,  with  notice  from  a  trustee,  conveys,  for  a 
valuable  consideration,  to  another  person  who  has  no  notice  of  the  trust, 
the  estate  will  not  be  affected  with  the  trust  in  the  hands  of  the  second 
purchaser. — Ib. 

16.  The  same  subject-matter  adjudicated  in  Cumberland  Coal  and  Iron  Co.  v. 
Sherman,  et  al,  30  Barbour,  553,  wherein  substantially  the  same  rulings  were 
made, n&7 

17.  The  subject  of  confirmation  fully  considered  in  the  New  York  case,  and 
reported  at  length, w-98 

18.  DIRECTOR  CAN  NOT  PROTECT  HIMSELF  AT  SACRIFICE  OF  THE  TRUST. — A  sale, 
far  below  value,  of  a  railroad,  with  its  franchises,  rolling  stock,  etc.,  under 
a  decree  of  foreclosure,  set  aside  as  fraudulent  against  creditors ;  the  sale 
having  been  made  under  a  scheme  between  the  directors  and  the  purchasers, 
by  which  the  directors  escaped  liability  on  indorsements  for  the  company; 
and  the  purchasers  held  to  be  trustees  for  the  full  value  of  the  property, 
less  a  sum  actually  paid  for  a  lien  claim,  presented  as  for  its  amount, 
but  which  they  had  bought  at  a  large  discount.     Drury  v.  Cross,  7  Wal- 
lace, 299, 262 

19.  PRACTICE.— But  because  the  full  value  of  the  property  sold  was  not  shown 
with  sufficient  certainty,  the  case  was  sent  back  for  ascertainment  of  it  by  a 
master. — Ib. 

20.  TRUSTEES.— A  director  is  a  trustee  for  the  corporation,  and  it  being  his  duty 
to  act  in  good  faith  toward  his  beneficiary,  it  is  a  breach  of  trust  on  hia 
part  to  create  any  relation  between  himself  and  the  trust  property,  whereby 
it  becomes  his  interest  to  subserve  his  individual  interests  at  the  expense 
or  to  the  injury  of  such  beneficiary,  or  the  trust  property.     Coo.  &  ****** 
E.  Co.  v.  Bowler  et  als., 

21.  Where  the  director  purchases  the  trust  property  at  a  judicial  s 

he  takes  and  holds  the  property  in  trust  for  the  corporation.    Such  pen* 
will  not  be  allowed  to  purchase  and  make  profit  out  of  the  estate  of 
to  whom  he  occupies  such  a  confidential  relation.— Ib. 

22.  Where  a  majority  of  directors  place  themselves  in  a  position  of  hostility  t 


622  INDEX. 

DIRECTOR — Continued. 

the  interest  of  the  trust,  such  majority  incapacitate  themselves  for  doing 
a  valid  act,  whereby  the  corporation  would  be  bound  in  regard  to  such 
interests,  and  deprive  the  minority  of  the  legal  power  of  acting  in  regard 
thereto. — Ib. 

See  ESTOPPEL,  7. 
ELECTION : 

See  CONFIRMATION  BY  CESTUI  QUE  TRUST;  DIRECTOR,  14. 

When  binding.    See  AGENTS,  15,  16,  17. 

To  take  under  will.    See  WILL,  1. 

EQUITABLE  ESTOPPEL : 

See  ESTOPPEL. 
EQUITABLE  TITLE : 

1.  MINORS. — Where  property,  in  which  minor  heirs  have  an  equitable  interest, 
is  being  improved  by  the  party  claiming  the  legal  title,  they  are  not  bound 
to  give  notice,  and  would  not  be  estopped  because  of  their  failure  to  do  so ; 
for  they  are  not  capable  of  estopping  themselves,  simply  by  failure  to  assert 
title.     Kane  County  v.  Hemngton,  50  Illinois,  232,         .        .       .„      ...T    158 

2.  ESTOPPEL. — If  persons  who  have  an  equitable  claim  to  real  estate,  assent  to, 
and  acquiesce  in,  acts  performed  in  relation  to  such  estate,  by  one  holding 
the  same  in  trust  for  the  equitable  claimants,  such  acts  of  the  trustee 
being  inconsistent  with  their  equitable  rights,  they,  by  such  assent  and 
acquiescence,  will  be  estopped  from  afterward  asserting  their  equitable 
claim. — Ib. 

3.  EQUITY  ADOPTS  STATUTE  OF  LIMITATIONS. — The  time  in  which  equitable 
claim  to  realty  should  be  asserted,  is  controlled  by  the  analogies  of  the  law ; 
and  if  twenty  years  are  allowed  to  elapse,  after  the  statutory  disability  of 
the  claimant  ceases,  without  asserting  such  claim,  he  is  placed  without  the 
pale  of  relief. — Ib. 

When  not  an  inheritable  estate.    See  RESULTING  TRUSTS,  8. 

Can  be  conveyed.    See  ADMINISTRATOR'S  PURCHASE  OF  TRUST  ESTATE. 

EQUITY : 

Flexibility  of  its  rules  to  subserve  the  ends  of  justice,        .        .    n.355,  «.368 
Converts  the  fraudulent  holder  into  a  trustee,  ex  maleficio,        .        .  w.368 

Bonafide  purchasers  are  protected, '      .     «.368 

Laches  that  will  bar  in  law  will  bar  in  equity,          .        .        v    '   v        •    «.38 

Can  not  review  or  reverse  legal  proceedings, w,15G 

Or  give  relief  where  clear  remedy  at  law  exists,        ....          w.249 
Or  impeach  collateral  proceedings.     See   ADMINISTRATOR'S  PURCHASE  OF 
TRUST  ESTATE,  4,  5. 

Will  restrain  breaches  of  trust  in  corporations, «.26S 

How  relief  is  granted  without  disturbing  legal  proceedings,       -'•».•       .      n.156 

Will  protect  agent  in  his  equitable  rights, «.189 

See  INSOLVENCY,  1,  2. 

ESTATE  FOR  LIFE: 

When  tenant  for  life  entitled  to  pay  for  improvements,         .         .        .      n.170 
When  beneficiary  can  recover  property  wrongfully  pledged,    .        .         n.387 

ESTATE  IN  REMAINDER: 
When  holder  can  sue  for  equitable  waste, w.170 


INDEX.  (523 

ESTOPPEL : 

1.  WHERE  ACQUIESCENCE  AMOUNTS  TO  ESTOPPEL.— The  owner  of  land  who 
stands  by,  without  objection,  and  sees  a  public  railroad  constructed  over  it, 
can  not,  after  the  road  is  completed,  or  large  expenditures  made  thereon 
upon  the  faith  of  his  apparent  acquiescence,  reclaim  the  land,  or  enjoin  its 
use  by  the  railroad  company.     There  can  only  remain  to  the  owner  a  right 
of  compensation.     Goodin  v.  Whitewater  Canal  Co.,  18  Ohio  St.  1C9,     .   125 

2.  ESTOPPEL  OF  TENANT. — A  tenant  is  estopped  from  questioning  his  land- 
lord's title,  when  sued  for  possession.     But  when,  upon  eviction  under  a 
paramount  outstanding  title,  he  has  attorned  to  the  true  owner,  he  is  not 
estopped  from  setting  up  the  eviction,  and  the  title  under  which  the  evic- 
tion was  had,  as  against  the  claim  of  his  lessor.     Kane  County  v.  Herringtan, 
50  Illinois,  232,  .        .        .-'.-"' 158 

3.  OP  HOLDER  OP  EQUITABLE  TITLE. — When  the  landlord  has  aliened  the  de- 
mised premises,  and  sues  the  tenant  in  ejectment,  the  tenant  may  defeat  the 
recovery  by  setting  up  the  conveyance.     But  where  a  party,  holding  the 
equitable  title  to  real  estate,  takes  a  lease  from  the  party  holding  the  legal 
title,  the  former  is  not  estopped  from  asserting  his  equitable  title  against 
his  lessor. — Ib. 

4.  ACQUIESCENCE. — The  regularity  of  the  proceedings  in  arbitration  can  not 
be  questioned,  where,  by  long  acquiescence,  it  has  acquired  such  force  that 
the  parties  in  interest  would  be  held  to  its  terms.     So,  where  a  bill  in 
chancery,  to  compel  a  conveyance,  was  filed  February,  1864,  the  defendants 
can  not  set  up  any  irregularity  in  the  proceedings  in  arbitration,  which 
occurred  June,  1838, 159 

5.  AGENT. — Money  having  been  paid  voluntarily  to  an  agent  for  his  principal, 
by  a  party  who  could  not  have  been  compelled  to  make  such  payment,  it 
becomes  the  property  of  the  principal  in  the  agent's  hands.    Nor  can  he 
resist  an  action  for  the  amount  so  received,  on  the  ground  that  the  money 
was  paid  on  an  illegal  contract  between  the  original  parties.     Murrey  v. 
VanderbiU,  39  Barbour,  140, 104 

6.  Not  being  pleaded,  the  question  of  estoppel  was  not  litigated  in  this  case. 
Paris  v.  Dunn,  1  Bush,  276,     . .  .  ^ 297 

7.  Where  directors  fail  to  interpose  an  equitable  defense  in  a  suit  against  the 
corporation,  such  failure  can  not  protect  one  of  the  faithless  directors  in 
his  profits  realized  by  such  breach  of  official  duty.     Cov.  &  Lex.  R.  R.  Co.  v. 
Bowler,  et  als., 468 

8.  WHERE  STOCKHOLDERS  ARE  ESTOPPED. — Individual  stockholders,  being  ad- 
mitted as  parties  in  a  suit  wherein  the  corporation  is  also  a  party,  and  filing 
pleadings  therein,  act  for  themselves  only,  and  not  for  the  corporation  ;  and 
the  latter  is  not  bound  or  estopped  by  the  action  of  the  court  thereon,  al- 
though they  may  have  set  up  the  same  acts  as  grounds  for  relief  that  are 
afterward  relied  upon  by  the  corporation. — Ib. 

9.  Merely  remaining  passive  does  not  deprive  a  party  of  the  right  to  seek  re- 
lief, unless,  in  addition  thereto,  he  does  some  act  to  induce  or  encourage 
others  to  expend  their  money  or  alter  their  condition,  and  thereby  renders 
it  unconscientious  for  him  to  enforce  his  claim.     "  No  such  act  upon  the 
part  of  the  company  is  shown  in  this  case," 467 

EQUITABLE,  defined,     .        .        .  .     '•   .    •'..••    ^        •        w-13- 
See  EQUITABLE  TITLE,  2. 


624  INDEX. 

ESTOPPEL —  Continued. 

Essential  qualities, ».133 

Must  be  a  misleading  to  the  prejudice  of  the  party  setting  it  up,       .  .«.133 

IN  LAW.— Must  be  willful, w.130 

In  pats,  must  be  fraudulent, w.131 

And  contrary  to  some  previous  act  or  assertion,     .         .                 .        .  H.I  32 

To  be  binding,  party  must  derive  some  advantage  or  consideration,      .  «.132 

What  length  of  time  will  work  an  estoppel, w.39 

WThat  special  circumstances  affect  the  rule, «.169 

Partial  abandonment  of  right  does  not  estop, «.203 

When  applied  to  husband  and  wife, «.296 

Where  minor  is  estopped, «.308 

See  AGENTS,  15,  16,  17 :  ACQUIESCENCE,  1,  2. 
By  deed.    See  PRACTICE,  1. 

Legislative.  See  CHARITABLE  BEQUESTS,  5 ;  CORPORATION,  19 ;  HUSBAND 
AND  WIFE,  5,  6,  8. 

EXECUTORS'  CONTINUING  PARTNERSHIP: 

1.  By  articles  of  partnership,  it  was  stipulated  that,  in  case  of  death,  the  part- 
nership should  cease  on  a  certain  subsequent  day,  and  the  property  of  the 
partnership  be  then  divided  between  the  surviving  partners  and  the  exec- 
utors of  the  deceased  partner.     One  partner,  by  his  will,  directed  all  his 
property  to  be  converted  and  invested  for  the  benefit  of  his  children,  and 
appointed  his  copartners  executors,  and  died,  leaving  his  children  infants. 
The  surviving  copartners  proved  his  will,  had  the  property  of  the  partner- 
ship valued,  and  then  continued  the  business  under  a  new  firm,  and  debited 
the   new   firm   with  the  value  of  the  testator's  share  of  the  partnership 
property,  but  did  not  otherwise  execute  the  directions  either  of  the  arti- 
cles or  of  the  will.     Held,  that  the  transaction  must  be  treated  as  a  nullity, 
so  far  as  the  children's  interests  were  concerned.     Wedderburn  v.  Wedder- 
burn,  18  Eng.  Ch.  40,  .        .        .        .        .        .        .        .        .'       .       348 

2.  WHEN  SURVIVING  PARTNERS  HELD  ANSWERABLE  FOR  PROFITS. — The  exec- 
utors of  a  testator,  his  surviving  partners,  continued  to  employ  his  share 
of  the  partnership  capital  in  trade,  held  answerable  for  a  proportionate 
share  of  the  profits,  notwithstanding  that  the  capital  of  the  partnership,  at 
the  time  of  the  decease,  consisted  of  debts  due  the  partnership. — 76. 

3.  RIGHTS  OF  MINORS. — Degree  of  weight  to  be  attached  to  deeds  of  release 
executed  by  cestui  que  trust  within  a  few  days  after  their  coming  of  age, 
when  such  releases  profess  to  proceed  upon  the  examination  of  complicated 
accounts. — Ib. 

4.  Difficulties  of  enforcing  in  chancery  a  cestui  que  tmst's  right  (however  clear) 
to  participate  in  profits  of  a  trade  carried  on  in  part  with  the  trust  fund,  349 

5.  Accounts  in  this  case  were  opened  after  great  lapse  of  time. 
See  ACCOUNTS,  1,  2. 

EXECUTOR'S  IMPROVING  TRUST  ESTATE: 

1.  EXECUTOR. — Tenant  for  life — Right  of  executor  who  has  expended  money  in  im- 
proving testator's  real  property — Right  of  tenant  for  life  against  remainder-man — 
Right  of  trustee  as  against  ceatui  que  trust. — C  was,  at  the  time  of  his  death, 
seized  of  a  plat  of  ground  upon  which  he  had  commenced  to  build  certain 
houses.  By  his  will  he  devised  all  his  real  and  personal  property  to  his 
father  for  life,  upon  trust,  as  to  one  moiety  of  the  rents  and  profits  for  him- 


INDEX.  625 

EXECUTOR'S  IMPROVING  TRUST  ESTATE— Continued. 

self,  and  as  to  the  other  for  other  parties,  with  remainder  over.  The  father 
became  the  personal  representative  of  C,  and  after  his  death  expended 
large  sums  of  money  in  completing  the  houses.  Held,  that  the  father  was 
not  entitled  to  a  charge  upon  the  plat  of  ground  for  the  moneys  expended 
by  him,  either  as  a  tenant  for  life,  trustee,  or  personal  representative  of  C. 
G-Uliland  v.  Crawford,  4  Irish  (Equity  Series),  35,  ....  392 

EXECUTOKS'  PURCHASE  OF  TRUST  PROPERTY: 

1.  WILL. — A  testator  bequeathed  legacies  to  his  children,  and  directed  that  BO 
much  of  his  real  estate  as  should  be  necessary  to  furnish  the  sums  be- 
queathed, should  be  sold  at  public  auction.     It  was  held,  that  the  sole  acting 
executor  had  power  to  sell  the  real  estate  under  the  will.    Davoue  v.  Fan- 
ning, 2  Johns.  Ch.  252, 1 

2.  PURCHASE  BY  TRUSTEE. — If  a  trustee  sells  the  trust  estate,  and  becomes  in- 
terested in  the  purchase,  the  cestui  que  trusts  are  entitled,  as  of  course,  to 
have  the  purchase  set  aside,  and  the  property  re-exposed  to  sale,  under  the 
direction  of  the  Court.     And  it  makes  no  difference  that  the  sale  was  at 
public  auction,  bona  fide,  and  for  a  fair  price,  and  that  the  executor  did  not 
purchase,  but  a  third  person  became  the  purchaser,  to  hold  in  trust  for  the 
separate  use  of  the  wife  of  the  executor,  who  was  one  of  the  cestui  que  trusts, 
and  had  an  interest  in  the  land  under  the  will  of  the  testator. — 76. 

3.  A  person  can  not  legally  purchase  on  his  own  account  that  which  his  duty 
or  trust  requires  him  to  sell  on  account  of  another,  nor  purchase  on  account 
of  another  that  which  he  sells  on  his  own  account.     He  is  not  allowed  to 
unite  the  two  opposite  characters  of  buyer  and  seller.     Michoud  v.  Girod, 
4  Howard,  503, 42 

4.  A  purchase,  per  interpositam  persanam,  by  a  trustee  or  agent,  of  the  particular 
property  of  which  he  has  the  sale,  or  in  which  he  represents  another, 
whether  he  has  an  interest  in  it  or  not,  carries  fraud  on  the  face  of  it. — 76. 

5.  This  rule  applies  to  a  purchase  by  executors,  at  open  sale,  although  they 
were  empowered  by  the  will  to  sell  the  estate  of  their  testator  for  the  ben- 
efit of  heirs  and  legatees,  a  part  of  which  heirs  and  legatees  they  themselves 
were.     A  purchase  so  made  by  executors  will  be  set  aside. — 76. 

6.  The  decisions  of  the  courts  of  several  States,  upon  this  subject,  examined 
and  remarked  upon. — 76. 

7.  SPANISH  LAW.— Relaxations  of  this  rule  of  the  civil  law  were  not  adopted 
by  the  Spanish  law,  and  of  course  never  reached  Louisiana.      Nor  were 
those  relaxations  carried  so  far  as  to  allow  a  testamentary  or  dative  exec- 
utor to  buy  the  property  "which  he  was  appointed  to  administer. — 76. 

8.  The  maxims  and  qualifications  of  the  civil  law,  upon  this  point,  ex- 
amined,       .         .        . 

9.  FRAUD.— Although  courts  of  equity  generally  adopt  the  statutes  of  limita- 
tion, yet,  in  a  case  of  actual  fraud,  they  will  grant  relief  within  the  life-time 
of  either  of  the  parties  upon  whom  the  fraud  is  proved,  or  within  thirty 
years  after  it  has  been  discovered  or  become  known  to  the  party  whose  rights 
are  affected  by  it. — 76. 

10.  Within  what  time  a  constructive  trust  will  be  barred  must  depend  upon  the 
circumstances  of  the  case,  and  these  are  always  examinable.—  76. 

11.  Acquittances  given  to  an  executor,  without  a  full  knowledge  of  all  the 
circumstances,  where  such  information  had  been  withheld  by  the  exec- 

41 


626  INDEX. 

EXECUTORS'  PURCHASE  OF  TRUST  PROPERTY—  Continued. 

utor,  and  menaces  and  promises  thrown  out  to  prevent  inquiry,  are  not 
binding. — 76. 

12.  RULE  AS  TO  PURCHASE  BY  TRUSTEE. — A  purchase  made  by  a  trustee  or 
guardian  of  the  trust  property,  or  by  an  executor  of  the  estate  of  his  tes- 
tator, from  himself,  during  the  continuance  of  the  fiduciary  character  of 
the  purchaser,  will  not  be  sanctioned,  unless  it  be  made  under  the  authority 
of  the  court,  and  consent  of  the  persons  beneficially  entitled  to  the  property, 
who  are  competent  to  consent ;  and  even  then  it  will  be  regarded  with  sus- 
picion.    Such  a  purchase,  however  fair,  is  voidable  at  the  option  of  the 
cestui  que  trust.     Nor  is  it  necessary  to  show  that  the  trustee  has  made  any 
profit  or  obtained  any  advantage  by  his  purchase ;  but  it  will  be  supported  if 
found  to  be  beneficial  to  the  trust  estate.    Faucett  v.  Faucett,  1  Bush,  511,  177 

13.  MUST  NOT  CREATE  AN  INTEREST  IN  HIMSELF  AGAINST  CESTUI  QUE  TRUST. — 

A  trustee  or  executor  will  not  be  permitted  to  create  in  himself  an  interest 
opposite  to  that  of  the  party  for  whom  he  acts,  nor  to  traffic  in  the  estate 
for  his  own  emolument.  This  principle  applies  also  to  administrators. — Ib. 

14.  WHERE  TRUSTEE  BUYS  AT  A  SALE  NOT  HIS  OWN. — An  executor  brought  suit 
in  equity  to  subject  the  land  of  a  debtor  of  the  testator  to  the  payment  of 
the  debt.     Pending  that  suit,  the  land  was  sold  under  a  decree  in  favor  of 
the  debtor's  vendor  for  a  balance  of  the  purchase-money,  and  the  executor 
bought  it.     He  afterward  sold  and  conveyed  the  land  to  a  stranger,  for 
more  than  enough  to  reimburse  what  he  had  paid  for  it,  and  to  satisfy  the 
debt  due  his  testator.     Held,  that  he  was  bound  so  to  apply  the  proceeds,  but 
was  not  bound  for  the  surplus.     Longest  v.  Tyler,  1  Duvall,  192,         .       173 

15.  The  doctrine  of  constructive  fraud  operates  to  prevent  infidelity  or  spolia- 
tion in  a  class  of  cases  embracing  executors  and  other  trustees,  in  which 
there  may  be  temptations  and  facilities  to  rapacity. — 76. 

16.  It  is  the  duty  of  trustees  to  guard,  in  good  faith,  the  interests  of  their  ben- 
eficiaries, and  never  to  speculate  on  them,  or  through  means  afforded  by 
them. — 76. 

17.  A  trustee  may  purchase  from  the  cestui  que  trust  the  trust  estate ;  but  such 
a  transaction  will  be  regarded  with  suspicion,  and  criticised  with  the  ut- 
most rigor;  and,  if  attacked  by  the  cestui  que  trust,  it  is  incumbent  on  the 
trustee  to  show  that  it  was  fair  and  just  in  all  respects,  and  consummated 
on  his  part  with  the  most  abundant  good  faith,  and   that  the  cestui  que 
trust  had  all  the  information  in  relation  to  the  trust  estate  possessed  by 
the  trustee.     See  1  Lead.  Cas.  in  Equity,  125.     Jones  v.  Smith,  33  Missis- 
sippi, 215, 194 

18.  When  the  trustee  has  been  guilty  of  no  positive  act  of  fraud  in  a  purchase 
made  by  him  from  the  cestui  que  trust  of  the  trust  estate,  the  latter  will  lose 
his  right  to  annul  the  agreement  if  he  fail  to  take  steps  to  set  aside  the 
contract  in  a  reasonable  time  after  its  consummation.     The  unreasonable 
delay  will  be  held  to  be  a  ratification. — 76. 

This  case  doubted  on  the  facts.     See  note  (a), 202 

19.  The  failure  of  the  cestui  que  trust  to  take  steps  to  set  aside  a  sale  made  by 
him  to  the  trustee  of  his  trust  estate,  for  three  years  and  eight  months,  is 
unreasonable,  where  the  trustee  has  not  been  guilty  of  any  positive  act  of 
fraud  or  concealment, 194 

20.  A  rescission  of  a  contract  will  not  be  decreed  at  the  instance  of  a  party 


INDEX.  627 

EXECUTORS'  PURCHASE  OF  TRUST  PROPERTY — Continued. 

guilty  of  negligence  and  unreasonable  delay  in  asserting  his  right*,  and 
when,  from  a  change  of  circumstances,  the  parties  can  not  be  restored  to 
the  same  situation  they  occupied  before  the  contract  was  made. — 16. 

EXECUTORS— WHEN  LIABLE: 

1.  Where  trustees  act  within  the  scope  of  their  authority,  and  exercise  such 
prudence,  care,  and  diligence  as  men  of  prudence,  care,  and  diligence  man- 
ifest in  like  matters  of  their  own,  they  should  not  be  held  accountable  for 
losses  happening  from  their  management  of  the  trust  funds.    Miller  v.  Chap- 
lin, 20  Ohio  St.  442, • 253 

2.  POWER  TO  REINVEST. — Where  executors  are  directed  by  will  to  put  money 
at  interest  for  a  specified  length  of  time,  by  deposit  in  bank  or  loan  upon 
mortgage,  they  have  a  discretion  to  loan  it  for  less  periods  than  the  whole 
time  named,  and  to  reloan  it,  from  time  to  time,  and  change  the  mortgage 
securities,  as  they  may  deem  best  for  the  parties  interested. — Ib. 

3.  CHANGING  SECURITIES. — In  such  cage,  if  the  executors  are  at  fault  in  taking 
insufficient  security  for  the  loan,  but  subsequently  procure  the  borrower  to 
substitute  therefor  other  security  deemed  by  them  sufficient,  and  such  as 
they  would  have  been  justified  in  taking  upon  the  original  loan,  they  will 
not  be  held  accountable  for  a  loss  happening  through  unforeseen  defects  in 
the  latter  security. — Ib. 

4.  WHAT  is  REAL  ESTATE  SECURITY? — A  mortgage  executed  by  an  individual 
member  of  a  firm,  upon  land  the  legal  title  to  which  is  vested  in  him,  but 
which  is  in  fact  owned  and  used  by  the  firm  as  partnership  property,  is 
"  real  estate  "  security,  within  the  meaning  of  a  clause  in  the  will  directing 
such  security  to  be  taken  for  money  loaned. — Ib. 

Doubted.     See  Dissenting  Opinion, 258 

5.  MUST  EXECUTORS  KNOW  THE  LAW? — The  maxim  that  every  person  is  pre- 
sumed to  know  the  law,  is  not  always  applicable  to  trustees.    On  the  con- 
trary, they  may  be  exonerated  from  losses  resulting  from  their  ignorance  of 
the  law,  in  cases  where  they  exercise  proper  diligence  and  precaution,  and 
act  upon  the  advice  of  counsel, 

WHITE  and  M'!LVAINE,  JJ.,  dissenting.     See  Dissenting  Opinion, 
See  GUARDIAN  AND  WARD,  1,  2. 

FRAUD : 

1.  DIRECTORS'  PURCHASE  FRAUDULENT.— Where  a  mortgage  by  a  railroad 
company,  upon  its  railroad  and  appurtenances,  had  been  foreclosed,  a  sale 
made  and  confirmed,  and  a  new  company  had  been  organized  by  the  pur- 
chasers, being  the  directors  who  made  the  mortgage,  and  others  holding 
the  bonds  secured  thereby,  upon  a  creditor's  bill :  Held,  on  the  facts  of  the 
case,  that  the  sale  was  fraudulent,  and  that  it  should  be  set  aside,  and  the 
new 'company  perpetually  enjoined  from  setting  up  any  right  or  title  under 
it ;  the  mortgage  to  remain  as  security  for  the  bonds  in  the  hands  of  bona 
fide  holders  for  value,  and  that  the  judgment  creditors  be  at  liberty  to  en- 
force their  judgments  against  the  defendants,  subject  to  all  prior  incum- 
brances.  James  v.  Railroad  Co.,  6  Wallace,  752, 

2    FRAUDULENT  SALE.- Where  the  notice  of  the  sale  of  a  radroad  unde 
mortgage  to  secure  railroad  bonds,  set  forth  that  the  sum  due  unde 
mortgage  was  $2,000,000,  with  $70,000  interest,  when  less  than  $ 
was  in  the  hands  of  bvna  fide  holders,  the  remainder  being  in  the  hands 


628  INDEX. 

FRAUD — Continued, 

directors,  or  under  their  control,  such  a  notice  was  fraudulent,  and  sufficient 
to  vitiate  the  sale,        *     , •..-•"'••        •        •      290 

Rule  as  to  constructive  fraud.  See  EXECUTORS'  PURCHASE  OF  TRUST  PROP- 
ERTY, 15,  16. 

Rule  as  to  actual  fraud.    See  EXECUTORS'  PURCHASE  OF  TRUST  PROPERTY,  9. 

Vitiates  every  transaction, ».368 

See  LIMITATION  OF  ACTIONS,  1,  4. 

By  attorney.    See  ATTORNEY,  2. 

See  DIRECTORS,  9  to  19;  EXECUTORS'  PURCHASE  OF  TRUST  PROPERTY,  9. 

GRANTOR  AND  GRANTEE: 

When  the  grantee  has  knowledge  that  the  grantor  was  a  director  in  the  corpo- 
ration of  the  beneficiary  at  the  time  he  acquired  the  property,  the  latter  is 
put  upon  inquiry  as  to  the  character  of  the  title  to  the  property  which  the 
director  thus  acquired.     Cov.  &  Lex.  R.  E.  Co.  v.  Bowler,  et  als.,        .        468 
See  PURCHASER. 

GUARDIAN  AND  WARD: 

1.  DUTY  OF  GUARDIAN. — When  the  law  intrusts  the  estate  of  an  infant  to  the 
care  of  a  guardian,  the  fiduciary  undertakes  to  be  vigilant,  faithful,  and 
competent.     These  imply  as  much  knowledge  of  law  as  may  be  necessary 
for  safety ;  this,  however  procured,  he  assumes  to  possess  and  properly  ex- 
ercise.    Hemphill  v.  Lewis,  7  Bush,  214,        .        .   "     . :  '    .        .        .     250 

2.  His  RESPONSIBILITY. — A  second  guardian  sued  the  former  guardian  to  re- 
cover estate  of  his  ward,  and  being  erroneously  advised  that  such  demand 
was  a  preferred  claim  against  such  former  guardian's  estate,  he  did  not  sue 
the  surety  of  the  former  guardian.     The  debt  was  lost  because  the  suit  was 
not  prosecuted  in  time.     The  second  guardian  is  held  responsible.     Fidu- 
ciary demands  have  priority  only  against  the  estates  of  dead  persons. — Ib. 

3.  PRACTICE.— In  a  proceeding  against  heirs,  a  personal  judgment  against  the 
husband  of  an  heir  is  wrong  when  the  record  does  not  show  why  the  hus- 
band should  be  held  responsible. — Ib. 

Transactions  between,  on  ward's  arriving  at  age,         .  "     .        .        .        «.355 
Burthen  of  proof  on  guardian — Ib. 
Ratification  by  ward,  when  presumed. — Ib. 
The  rule  applies  to  other  parties. — 76. 
When  liable.    See  EXECUTORS,  5. 

HEIR: 

1.  In  a  suit  in  chancery,  brought  by  heirs,  a  disclaimer  by  one  of  the  heirs 
does  not  vest  the  interest  so  disclaimed  in  the  remaining  heirs.  Kane 
County  v.  Herrington,  50  Illinois,  232, 159 

Can  disaffirm  purchase  by  administrator.  See  ADMINISTRATORS'  PURCHASE  OF 
TRUST  ESTATE,  3,  4. 

Where  estate  insolvent,  can  not  impeach  purchase  by  trustee.  See  ADMINIS- 
TRATOR— WHEN  NOT  CHARGEABLE  AS  TRUSTEE,  3. 

How  warrantee  affects  the  heir.    See  CONVEYANCE,  1. 

Right  of  heirs  to  surplus  of  bequest.    See  CHARITABLE  BEQUEST,  12. 

HUSBAND  AND  WIFE: 

1.  COVENANT  OF  HUSBAND  ON  SEPARATION. — A  covenant  by  a  husband  for  the 
maintenance  of  the  wife,  in  a  deed  of  separation,  where  the  consideration  is 


INDEX.  629 

HUSBAND  AND  WIFE — Continued. 

apparent,  must  now  be  regarded  on  authority  as  valid,  notwithstanding  the 
serious  objections  to  such  deeds.  It  will  accordingly  be  enforced  in  equity, 
if  it  appear  that  the  deed  was  not  made  in  contemplation  of  a  future  posw- 
ble  separation,  but  in  respect  to  one  which  was  to  occur  immediately,  or  for 
the  continuance  of  one  that  had  already  taken  place.  Walker  v.  'Walker's 
Executors,  9  Wallace,  743, 3]0 

2.  The  validity  of  such  a  covenant  is  not  impaired  by  a  provision  that,  if  the 
parties  should  afterward  come  together,  the  trust  should  remain  and  be  ex- 
ecuted in  like  manner  as  if  they  should  remain  separate. — 76. 

3.  HUSBAND  TRUSTEE  FOR  WIFE.— A  husband  may  be  chargeable,  as  trustee, 
with  the  income  of  his  wife's  separate  property,  if  he  have  received  it  from 
her  to  invest  it  for  her,  whether  the  income  be  of  property  which  he  has 
settled  upon  her,  or  from  some  other  separate  property  of  hers. — Ib. 

4.  PRACTICE  OF  FEDERAL  COURTS. — The  Federal  courts,  where  they  have  ju- 
risdiction, will  enforce  the  same  rules  in  the  adjustment  of  claims  against 
ancillary  executors,  that  the  local  courts  would  do  in  favor  of  their  own 
citizens. — Ib. 

5.  No  ESTOPPEL. — A  widow,  formal  party  to  a  deed  of  compromise  between 
the  heirs-at-law  of  a  decedent  and  his  residuary  devisees,  by  which  a  spe- 
cific sum  is  given  to  the  former  and  the  residue  of  the  estate  to  the  latter, 
does  not  estop  herself  from  coming  upon  the  estate  for  separate  moneys  of 
hers,  received  by  her  husband  to  invest  for  her,  but  which  he  did  not  so 
invest. — Ib. 

6.  Nor  does  she  estop  herself  from  asserting  such  a  claim  against  her  hus- 
band's executors,  by  her  acceptance  of  a  provision  under  his  will,  in  satis- 
faction of  dower. — Ib. 

7.  HUSBAND  CHARGED  WITH  COMPOUND  INTEREST. — The  estate  of  a  husband, 
who  had  maltreated  his  wife,  and  obtained  from  her  the  income  of  her  sep- 
arate property  under  a  promise  to  invest  it  for  her,  but  who  did  not  so  invest 
it,  charged  after  his  death  with  interest,  compounded  annually,  through 
a  long  term  of  years,  and  deprived  of  all  commissions  for  services  as 
trustee, 311 

8.  ESTOPPEL  OF  WIFE. — Where  a  husband,  holding  title  to  land  in  trust  for  his 
wife,  at  her  request,  sells  the  same  to  a  stranger,  a  specific  execution  of  the 
contract  will  be  decreed  against  the  husband,  although  the  wife  joins  the  hus- 
band in  resisting  the  same.     Rostetter  and  Wife  v.  Grant,  18  Ohio  St.  126,    293 

9.  No  DOWER  IN  WIFE'S  EQUITY. — As  the  right  of  the  wife  in  such  case  is  a 
mere  equity,  and  she  can  have  no  claim  of  dower  in  the  property,  it  is  un- 
necessary for  her  to  join  in  the  deed,  in  order  to  vest  in  the  purchaser  a 
title  freed  from  her  claim  ;  and  it  is  not  error  in  the  court  to  order  the  hus- 
band to  convey  such  title. — Ib. 

10.  MARRIAGE  SETTLEMENT. — Where  the  draft  of  a  supposed  settlement  in 
contemplation  of  the  marriage  of  an  infant  ward  of  court,  containing  a 
covenant  to  settle  after-acquired  property,  but  no  provision  as  to  a  second 
marriage,  was  approved  by  the  intended  husband  but  never  executed, 
though  a  post-nuptial  settlement  in  different  terms  was  executed,  the  court 
varied  the  latter  settlement  by  adding  the  covenant  as  to  after-acquired 
property.  Ee  Hoards  Trusts,  4  Giffard's  Ch.  254,  .... 
Husband  estopped  by  marriage  settlement,  although  voidable  by  the  wife,  w.296 


G30  INDEX. 

HUSBAND  AND  WIFE— Continued. 

Wife  barred  by  lapse  of  time, y  .-.;  «.296 

Where  wife  can  recover  her  life  estate  wrongfully  pledged,        .    ,    .  w.387 

Wife's  ante-nuptial  set  aside  by  husband,        ....        »:  .   «.407 

Wife's  equities  prevail  against  husband's  creditors,     .        .         .        .  #.308 

Authorities  sustaining  contracts  for  separation,       .         .        •...«,.  •   «.315 

Where  wife's  property  is  not  reduced  to  possession  by  husband,         .  ».308 
A  marriage  settlement  drawn  by  husband  held  not  binding. — Ib. 

IGNORANCE  AND  WANT  OF  EDUCATION : 

1.  The  fact  that  a  person  is  unlearned,  affords  no  ground  of  relief  in  equity, 
unless  it  also  appears  that  he  relied  upon  the  person  against  whom  relief 
is  sought,  and  such  person  misrepresented  the  facts.  Boyd  v.  Blankman,  29 
California,  19, '  ':  ,  148 

When  it  will  excuse  lapse  of  time  in  bringing  suit,      .        .        .  w.39 

INNOCENT  PURCHASER: 
See  PURCHASER,  4. 

INSOLVENCY : 

1.  If  an  insolvent  corporation  should  become  a  bidder  for  its-own  property  at 
a  judicial  sale,  and  comply  with  the  terms  thereof,  it  would  in  such  case 
become  the  purchaser ;  and  there  is  no  valid  reason  to  deprive  it  of  the 
right  to  charge  its  trustee  as  such  purchaser,  and  he  can  not  set  up  the 
insolvency  of  his  beneficiary  as  a  defense.     Cov.  &  Lex.  It.  R.  Co.  v.  Bowler, 
etals., 468 

2.  In  this  case  it  is  the  duty  of  the  appellant  to  pay  its  debts  ;  and  if  this  can 
not  be  done,  still  it  is  its  duty  to  require  possession  of  the  road,  that  it  may 
be  again  sold  for  the  benefit  of  creditors  whose  debts  have  not  been  paid. 
The  appellees  have  no  right  to  demand  a  resale,  but  the  creditors  have  the 
right  so  to  do,  in  a  proper  tribunal,  in  default  of  the  payment  of  their  just 
claims. — Ib. 

INTEREST  ON  MONEY : 
See  HUSBAND  AND  WIFE,  8. 

When  payable,  syllabus, 2G2 

See  TRUSTEE  UNDER  WILL,  16, 17 ;  AGENTS,  21. 

INTEREST— PERSONAL : 

1.  WHAT  INTEREST  DISQUALIFIES  A  JUDGE. — An  incorporated  company  filed  a 
bill  against  a  land-owner  in  a  matter  largely  involving  the  interests  of  the 
company.  The  Lord  Chancellor  had  an  interest  as  a  shareholder,  a  fact 
which  was  unknown  to  the  defendant  in  the  suit.  The  Vice-Chancellor 
granted  the  relief  sought.  The  Lord  Chancellor,  on  appeal,  affirmed  the 
order  of  the  Vice-Chancellor :  Held,  that  the  Lord  Chancellor  was  disquali- 
fied, on  the  ground  of  interest,  from  sitting  as  judge  in  the  case,  and  that 
his  decree  was  voidable,  and  must  be  reversed.  Held,  also,  that  the  Vice- 
Chancellor  is,  under  the  53  Geo.  3,  ch.  24,  a  judge  subordinate  to,  but  not 
dependent  on,  the  Lord  Chancellor,  and  that  his  decree  might  be  made  the 
subject  of  appeal  to  the  House  of  Lords.  Dimes  v.  Grand.  Junction  Canal, 
3  House  of  Lords  Cases,  759,  .  .  .  ...  .  .456 

INVESTMENT  OF  TRUST  FUND : 
See  TRUSTEE  UNDER  WILL;  EXECUTORS — WHEN  LIABLE;  TRUSTEE. 


INDEX. 


631 


JUDGE: 

What  interest  disqualifies.    See  INTEREST— PERSONAL,  1. 
JURISDICTION: 

1.  Where  a  judicial  sale  made  by  the  Fayette  Circuit  Court,  and  the  super- 
vision  of  the  property  sold  is  retained  by  the  Court  for  the  purpose  of  car- 
rying out  the  terms  of  the  sale,  the  Kenton  Circuit  Court  has  jurisdiction 
in  an  original  action  to  charge  the  purchaser  of  such  property  a*  trustee 
for  the  original  owners.  Neither  court  will  be  required  to  subordinate  it- 
self to  the  other.  Cov.  &  Lex.  R.  R.  Co.  v.  Bowler,  et  ok,  4QQ 
LACHES: 

What  will  bar  a  legal  title  will  bar  equity,      .   V-     v.  - .  «  38 

What  circumstances  will  excuse  delay,     .        .  „  30 

To  avoid,  the  circumstances  must  be  averred  and  proved,  .  '  «.169 

Held  to  bind  a  widow  on  remarriage,       ...  „  203 

See  TRUSTEE,  1. 

LAPSE  OF  TIME: 

What  length  of  time  will  bar  suit,          .        .        /  « 39 

Merely  as  such,  does  not  bar. — Ib. 

Under  special  circumstances,  may  bar, «.169  «.170 

Held  to  bar  in  a  doubted  case, .  «.202 

Where  it  affirms  voidable  acts,    »,..., ».296 

When  it  affects  rights  of  beneficiary.    See  AGENTS,  7,  13. 
See  TRUSTEE,  4 ;  ACCOUNTS,  2. 

LIFE  TENANT: 
See  ESTATE  FOR  LIFE  ;  TRUSTEE  UNDER  WILL,  1,  2. 

LIMITATION  OF  ACTIONS : 

1.  IN  CALIFORNIA. — The  Statute  of  Limitations  is  applicable  alike  to  causes 
of  action  in  equity  and  at  law.     When  the  action  is  for  relief  on  the  ground 
of  fraud,  accrued  more  than  three  years  before  the  commencement  of  the 
action,  the  complaint  should  also  aver  that  the  acts  constituting  the  fraud 
had  been  discovered  within  three  years;   but  if  the  replication  contains 
this  averment,  and  this  issue  is  tried  without  objection,  the  irregularity 
will  be  disregarded.     Boyd  v.  Blankman,  29  California,  19,        .        .       148 

2.  A  defendant  relying  on  the  statute  should  not  allege  matter  of  law,  but  the 
facts  which  bring  him  within  the  statute. — Ib. 

3.  An  answer  stating  that  the  cause  of  action  has  not  accrued  within  five  years, 
is  sufficient  for  five  years ;  and  for  any  period  of  limitation  named  in  the 
statute,  less  than  five  years. — Ib. 

4.  DISCOVERY  OF  FRAUD. — The  clause  in  the  Statute  of  Limitations,  providing 
that  an  action  for  relief  on  the  ground  of  fraud  shall  not  be  deemed  to  have 
accrued  until  the  discovery  of  the  facts,  is  applicable  to  constructive  fraud 
as  well  as  fraud  in  fact,  and  may  be  commenced  at  any  time  within  three 
years  after  a  discovery  of  the  facts  constituting  the  fraud,  or  of  facts  suf- 
ficient to  put  a  person  on  inquiry. — Ib. 

5.  Where  the  petition  alleges  breaches  of  trust,  whereby  the  trust  property  (a 
railroad)  is  sold,  and  one  of  the  directors  becomes  the  purchaser,  and  the 
prayer  is  that  such  purchase  be  annulled,  the  property  be  declared  to  be 
held  in  trust,  and  adjudged  to  be  reconveyed  to  the  beneficiary,  and  for  an 
account,  the  suit  is  not  for  the  recovery  of  real  estate,  as  contemplated  by 


632  INDEX. 

LIMITATION  OP  ACTIONS — Continued. 

sec.  2,  art.  1,  ch.  63,  2  Rev.  Stat.  123,  or  for  relief  on  the  ground  of  fraud  ; 
but  is  a  suit  to  declare  and  enforce  an  implied  or  constructive  trust,  and  is 
barred  in  five  years.  Cm.  &  Lex.  R.  R.  Co.  v.  Bowler,  et  als.,  .  .  466 
6.  In  such  case,  the  purchaser  having  deceased  within  five  years  from  the  time 
of  his  purchase,  and  the  suit  brought  within  one  year  after  letters  of  ad- 
ministration were  taken  out  on  his  estate,  the  suit  is  within  the  time  limited 
by  the  statute. — Ib. 

Equity  follows  the  time  prescribed  by  law,  .  ».145,  «.146,  «.203,  w.204 
Does  not  apply  to  continuing  and  subsisting  trusts,  ....  w.249 
Statute  runs  against  town  in  regard  to  public  property,  .  .  .  «.344 
See  AGENCY  AFFECTING  REAL  ESTATE,  7, 13;  TRUSTEE,  1,  2;  TRUSTEE  UNDER 
WILL,  1,  2,  3,  4 ;  EQUITABLE  TITLE,  3. 

MANDATE: 

In  Covington  and  Lexington  Railroad  Co.  v.  Bowler,  et  als.,    ....     596 

MINORITY : 

When  it  will  be  excuse  for  delay  in  bringing  suit,          ....      «.39 

Where  minor  is  estopped, w.296,  «.308 

What  weight  to  be  attached  to  release  on  arriving  at  age.    See  EXECUTORS' 
CONTINUING  PARTNERSHIP,  1. 

When  not  bound  by  acquiescence, «.170 

Opening  accounts  by,  reason  of.    See  ACCOUNTS,  1,  2. 
When  minors  not  estopped.    See  ESTOPPEL,  1. 

MORTGAGE: 
See  EQUITY  ;  FRAUD. 

Difference  between  mortgage  and  deed  of  trust,        ....         w.425 
Where  deed  ofvtrust  will  be  held  a  mortgage. — Ib. 

Where  condition  of  defeasance  held  not  to  be  a  conditional  sale.     Honore  v. 
Eutehings,  8  Bush,  687, 420 

MULTIFARIOUSNESS : 
See  PLEADING  AND  PRACTICE,  1,  2. 

MUNICIPAL  CORPORATIONS: 
See  CHARITABLE  BEQUESTS,  2,  3,  4, 13,  14. 
Statute  of  Limitations  runs  against, «.344 

NOTICE: 
See  AGENCY  AFFECTING  REAL  ESTATE,  5,  6. 

Constructive,  when  held  sufficient, n.407 

Contra,  see  PURCHASER  WITH  NOTICE,  3. 

See  DIRECTOR,  10,  11,  15;  PURCHASER,  1,  2,  3. 

PARTIES: 

1.  NECESSARY  PARTIES. — In  a  case  where,  notwithstanding  a  conveyance  in 
trust,  the  relation  of  trustee  for  the  corporation  continued  in  the  original 
purchaser,  the  director  and  his  representatives  should  be  made  a  party  in 
a  suit  to  establish  a  claim  against  the  trust  property ;  and  the  suit  being 
also  for  the  recovery  of  the  property  itself,  the  beneficiaries  under  the  con- 
veyance in  trust  are  also  necessary  parties  in  the  suit.     Con.  &  Lex.  R.  R. 
Co.  v.  Bowler,  et  als 467 

2.  Where  the  title  held  is  a  naked  trust,  with  only  a  limited  power  to  convey, 


INDEX.  633 

PARTIES — Continued. 

and  the  management  rests  with  the  beneficiaries,  the  heirs  of  a  deceased 
beneficiary  are  necessary  parties  in  a  suit  to  establish  the  implied  trust 
arising  from  the  directorship  and  purchase  during  its  continuance,  .  468 

PERPETUAL  USES: 

Where  an  interest  equivalent  to  a  fee  passes,        .     .....        .        .      w.344 

Wherever  the  legal  title  goes,  it  is  burthened  with  the  trust.— 16. 

PERSONAL  INTEREST: 
What  interest  disqualifies  a  judge.    See  INTEREST— PERSONAL,  1. 

PLEADING  AND  PRACTICE: 

1.  Whether  a  bill  in  equity  is  open  to  the  objection  of  multifariousness,  must 
be  decided  upon  all  the  circumstances  of  the  case.     No  general  rule  can  be 
laid  down,  and  much  must  be  left  to  the  discretion  of  the  court.     Piatt  v. 
Oliver,  3  Howard,  333,          . 19 

2.  The  objection  of  multifariousnese  can  be  taken  only  by  demurrer,  plea,  or 
answer,  and  not  at  the  hearing  of  the  cause.    But  the  court  itself  may  take 
the  objection  at  any  time.    The  objection  can  not  be  taken  in  the  appellate 
court. — Ib. 

3.  Where  exceptions  are  taken  to  a  master's  report,  it  is  not  necessary  for  the 
court  to  allow  or  disallow  them  on  the  record.     It  will  be  sufficient  if  it 
appears  from  the  record,  that  all  of  them  have  been  considered,  and  al- 
lowed or  disallowed,  and  the  report  reformed  accordingly. — Ib. 

4.  JOINT  WRONG-DOERS. — If  several  trustees  are  implicated  in  a  common  breach 
of  trust,  for  which  the  cestui  que  trust  seeks  relief  in  equity,  he  may  bring 
his  suit  against  all  of  them,  or  against  any  of  them,  separately,  at  his  elec- 
tion, the  tort  being  treated  as  several  as  well  as  joint:  And  the  same  doc- 
trine applies  to  any  wrong-doer  who  is  confederated  with  a  fraudulent 
trustee.     Heath  v.  Erie  Railway  Co.,  8  Blatch.  347,  ...          431 

5.  PARTIES. — It  is  not  necessary  that  the  directors  should  be  made  parties, 
although  the  bill  prays  for  an  injunction  against  the  corporation,  and  for  a 
receiver  of  the  corporation,  if  no  relief  is  asked  as  against  such  directors. 
The  bill  in  this  case  was  allowed  to  be  amended  by  striking  out  the  name 
of  a  person  improperly  joined  as  plaintiff. — Ib. 

To  excuse  laches,  etc.,  must  specify  cause  and  make  proof  thereof,      .     «.169 
Where  stockholders  are  proper  parties,       .        .        ....        .        «.268 

WThere  they  can  sue  their  directors. — Ib. 

Legal  proceedings  can  not  be  impeached  collaterally,  syllabus,      .    373,  «.377 

See  ADMINISTRATOR'S  PURCHASE  OF  TRUST  ESTATE,  4,  5;  LIMITATION  OF 

ACTIONS,    1,  2,  3,  4;    TRUSTEE;   CHARITABLE  BEQUESTS,  14;    PARTIES; 

PRACTICE. 

POSSESSION: 
Effect  on  equitable  claim.    See  RESULTING  TRUST,  4 ;  ADVERSE  POSSESSION. 

PRACTICE : 

1.  Where  the  purchaser  at  a  judicial  sale  claims  a  vendible  interest  in  the 
property,  and  executes  a  conveyance  thereof  in  trust,  the  holders  them- 
selves recognize  such  power  by  purchasing  such  interest;  and  being  held  in 
trust,  the  beneficiary  can  call  upon  a  court  of  equity  to  declare  the  same, 


634  INDEX. 

PRACTICE — Continued. 

and  compel  a  relinquishment  of  the  claim  thereto.     Cov.  &  Lex.  R.  R.  C.o. 
v.  Bowler,  et  oJs.,     ...........      468 

See  CLERK,  2;  GUARDIAN  AND  WARD,  3;  RESULTING  TRUST,  5;  PLEADING 
AND  PRACTICE  ;  TRUSTEE  UNDER  WILL,  7. 

In  the  Federal  courts.    See  HUSBAND  AND  WIFE,  4. 

See  DIRECTOR,  19;  LIMITATION  OF  ACTIONS,  1,  2,  3,  4,  5;  PARTIES,  1,  2;  IN- 
SOLVENCY, 1,  2. 

PRESIDENT  OF  A  CORPORATION: 
See  CORPORATION,  10,  11,  12, 13,  14. 
When  authorized  to  continue  the  former  business  of  his  company.     See  Murrey 

v.  VanderbiU, 103 

His  relation  to  the  company.    See  York,  etc.,  R.  R.  Co.  v.  Hudson,    .        .     59 

PURCHASER-WITH  NOTICE: 

1.  CONSTRUCTIVE  NOTICE. — Where,  upon  the  face  of  the  title-papers,  the  pur- 
chaser has  full  means  of  acquiring  complete  knowledge  of  the  title  from 
the  references  therein,  he  will   be   deemed  to  have   constructive  notice 
thereof.     Oliver  v.  Piatt,  3  Howard,  333, 19 

2.  CO-PROPRIETOR. — A  co-proprietor  of  real  property,  derived  under  the  same 
title  as  the  other  proprietors,  is  presumed  to  have  full  knowledge  of  the 
objects  and  purposes  and  trusts  attached  to  the  original  purchase,  and  for 
which  it  is  then  held  for  their  common  benefit. — 76. 

3.  WHEN  INNOCENT  PURCHASER. — A  purchaser  by  a  deed  of  quit-claim  with- 
out warranty,  is  not  entitled  to  protection  in  equity  as  a  purchaser  for  a 
valuable  consideration,  without  notice;  and  he  takes  only  what  the  vendor 
could  lawfully  convey. — Ib. 

4.  INNOCENT  PURCHASERS. — Where  a  special  warranty  of  title  is  taken  by  the 
grantee  under  such  circumstances  as  imply  knowledge  that  the  property 
was  held  in  trust,  the  grantee  is  not  an  innocent  purchaser  entitled  to  hold 
against  a  beneficiary   of  the  grantor.     Cov.  &  Lex.  R.  R.  Co.  \.  Bowler, 
et  ah.,          .  468 

See  GRANTOR  AND  GRANTEE  ;  AGENCY  AFFECTING  REAL  ESTATE,  6. 

RATIFICATION,  OR  CONFIRMATION: 
See    ACQUIESCENCE  ;    CONFIRMATION    BY    CESTUI   QUE  TRUST  ;    ELECTION  ; 

DIRECTOR,  14. 
Effect  of  partial  confirmation, v.       «.39 

REAL  ESTATE  AGENT: 
See  AGENTS,  14, 15, 16,  17. 

REDEMPTION: 
Rule  governing.    See  AGENTS,  12,  21. 

RELEASE : 

See  EXECUTORS'  PURCHASE  OF  TRUST  PROPERTY,  11;  ACCOUNTS,  1,  2. 

RESULTING  TRUST: 

1.  FATHER  HELD  AS  TRUSTEE  FOR  CHILD — RIGHTS  OF  CREDITORS. — A  married 
woman  relinquished  her  dower  in  five  hundred  acres  of  land  sold  and  con- 
veyed by  her  husband  to  their  son-in-law,  on  the  condition  that  their  single 
daughter  should  have  one  hundred  acres  of  the  land,  or  ita  equivalent,  ten 
thousand  dollars,  to  secure  her  a  home.  Paris  v.  Dunn,  7  Bush,  276,  297 


INDEX.  635 

RESULTING  TRUST—  Continued. 

2.  RESULTING  TBusr.-The  father  bought  for  his  daughter  a  hundred  acre*  of 
land  selected  by  her,  and  paid  for  it  with  her  money,  received  and  held  for 
thai  purpose,  and  without  her  knowledge  or  consent  took  the  conveyance  of 
the  legal  title  to  himself.     Immediately  after  the  purchase,  in  1852,  the 
father  put  his  daughter  in  possession  of  the  land  so  bought  for  her  where 
ever  since  she  has  resided  as  her  only  home.     A  trust  was  thus  raised  'in  favor 
of  the  daughter  in  possession,  which  was  sufficient  to  protect  her  possession 
and  title  against  the  mortgagees  of  her  father.— Ib. 

3.  RESULTING  TRUSTS— HOW  ESTABLISHED.— Resulting  trusts  may  be  established  by 
oral  testimony  as  satisfactorily  as  by  written  evidence. — Ib. 

4.  PRIOR  EQUITY.— A  party  having  a  prior  subsisting  equity— an  available 
resulting  trust— combined  with  long  possession,  under  a  verbal  contract  not 
void— would  have  a  sufficient  defense,  even  if  not  enforceable  as  a  trust 
against  parties  in  adverse  possession.     A  good  defense  to  a  party  in  posses- 
sion of  land,  might  not  be  enforceable  as  a  good  cause  of  action  against 
another  party  in  the  adverse  possession  of  the  same  land.— Ib. 

5.  PRACTICE.— Purchaser  of  one's  own  land  at  a  decretal  pale— purchaser  is 
released  from  bonds  for  purchase  price.     The  surety  is  required  to  litigate 
his  liability  on  the  bonds  for  the  purchase  of  the  land,  as  if  substituted  to 
the   place   of  the  principal,  while  the  principal   is  fully  released.      See 
the  opinion  and  response  of  the  court  for  the  facts  and  reasons  for  this 
decision. — Ib. 

6.  When  the  owner  of  a  claim  to  Government  land  sold  a  portion  of  his  claim 
to  another,  to  pay  the  money  necessary  to  secure  the  remaining  interest  in 
such  claim  to  his  vendor,  and  the  money  was  paid,  the  equitable  interest 
attached  to  the  land,  and  an  estate  in  trust  resulted  therefrom,     fane 
County  v.  Herrington,  50  Illinois,  232, 158 

7.  STATUTE  OF  FRAUDS. — Resulting  trusts  are  not  embraced  in  the  statute  of 
frauds,  but  only  express  trusts,  resting  in  parol,  or  other  verbal  agreements 
for  the  sale  of  lands,  are  within  the  purview  of  the  statute. — Ib. 

8.  EQUITABLE  INTEREST. — A  owned  a  claim,  and  sold  a  portion  of  his  claim 
to  B,  in  consideration  that  B  would  pay  a  sum  to  secure  the  title  to  the  re- 
maining portion  in  A.     Afterward  A  died,  and  the  purchase  by  B  was  made 
and  perfected  after  his  death.     Held,  that  B  held  the  money  in  trust  for  the 
heirs  of  A,  and  that,  by  a  subsequent  payment,  the  equitable  interest  of  the 
heirs  in  the  money  attached  to  the  land,  and  an  estate  in  trust  was  thereby 
created.     But  after  the  death  of  A,  and  before  the  money  was  paid  by  B, 
one  of  the  heirs  died.     Held,  that  such  heir  did  not  have  an  estate  of  inherit- 
ance in  such  purchase  that  could  pass  by  descent  to  his  heirs,     .        .     159 

9.  A  RESULTING  TRUST  AND  PLEDGE  OR  MORTGAGE  NOT  A  CONDITIONAL  SALE. — 

Hutchings  and  Honore  jointly  purchased  thirty  acres  of  land.  Hutchings 
advanced  the  purchase-price,  took  a  conveyance  to  himself,  and  executed  a 
writing  in  which  it  is  agreed  that  when  said  land  is  sold,  Hutchings  is  to 
have  his  six  thousand  dollars,  and  ten  per  cent  interest,  and  the  profits 
over  and  above  said  sum  are  to  be  equally  divided  between  said  parties. 
"  This  arrangement  is  to  continue  eighteen  months,  when,  if  the  property 
has  not  been  sold,  Honore  is  to  pay  one-half  the  sum  so  advanced,  with  in- 
terest, or  said  Hutchings  is  to  be  the  sole  owner  of  the  same."  The  land 
was  not  sold  within  the  eighteen  months,  and  Honore  failed  to  pay  any  part 


636  INDEX. 

RESULTING  TRUST — Continued. 

of  die  sum  so  advanced.  Held,  that  a  trust  resulted  in  favor  of  Honore  to 
the  extent  of  one-half  of  the  land  jointly  purchased.  This  interest  he 
pledged  to  Hatchings  to  secure  the  repayment  to  him  of  one-half  the  pur- 
chase-price advanced,  etc.;  and  Honore  is  entitled  to  one-half  of  the  net 
profits  realized  upon  the  resale  of  the  same.  Honore  v.  Hutchings,  8  Bush, 
687 .  420 

10.  NOT  A  CONDITIONAL  SALE. — The  conveyance  to  Hutchings  and  the  condition 
of  defeasance  executed  by  him  to  Honore  must  be  construed  together,  as 
though  the  one  was  incorporated  into  the  other.     When  so  construed,  the 
one  took  an  absolute  title  to  the  joint  property  of  both,  having  first  exe- 
cuted to  the  other  a  condition  of  defeasance.     In  such  a  case  the  onus  de- 
volves on  the  party  who  insists  that  the  contract  was  a"  conditional  sale,   421 

11.  BUT  A  MORTGAGE. — Such  an  arrangement  is  perfectly  consistent  with  the 
idea  of  a  mortgage,  and  the  rule  is,  that  in  all  doubtful  cases,  the  law  will 
construe  a  contract  to  be  a  mortgage. — Ib. 

12.  DISTINCTION  BETWEEN  A  MORTGAGE  AND  A  CONDITIONAL  SALE. — Where  the 
debt  still  subsists,  or  the  money  is  advanced  by  way  of  loan,  with  a  per- 
sonal liability  to  repay  it,  and  by  the  terms  of  the  agreement  the  land  is  to 
be  reconveyed  on  payment  of  the  money,  it  will  be  regarded  as  a  mortgage ; 
but  where  the  relation  of  debtor  and  creditor  is  extinguished  or  never  ex- 
isted, there  a  similar  agreement  will  be  considered  as  merely  a  conditional 
sale. — Ib. 

13.  PRESUMPTION  IN  FAVOR  OF  COMMON  LAW. — The  common  law  will  be  pre- 
sumed to  be  in  force  in  a  state  where  a  transaction  took  place,  when  there 
is  nothing  in  the  record  showing  the  contrary. — 76. 

Where  a  resulting  trust  does  arise, «.308,  «.425 

By  contract  between  husband  and  wife. — Ib. 

And  creditors  of  husband  can  not  subject  wife's  property. — 76. 

Creditor  can  not  prevail  against  wife's  equity. — Ib. 

Where  a  resulting  trust  does  not  arise,         .......       n.309 

May  fail  for  want  of  certainty. — 76. 

Can  not  arise  when  conveyance  is  for  "  love  and  affection." — 76. 

SALE: 
Fraudulent.    See  DIRECTOR,  9  to  19 ;  FRAUD,  1,  2. 

SALE— CONDITIONAL : 

Difference  between,  and  resulting  trust.     See  RESULTING  TRUST,  9,  10,  11,  12. 
Where  deed  absolute  held  a  mortgage,        ......        «.425 

SCOTCH  LAW: 
On  trusts.    See  DIRECTOR,  6. 

SPANISH  LAW: 
On  trusts, 54 

STALE  CLAIM: 
See  LACHES;  LAPSE  OF  TIME;  STATUTE  OF  LIMITATIONS;  TRUSTEE,  1. 

STOCKHOLDER: 

1.  WHO  ARE  STOCKHOLDERS? — A  person  who  has  no  shares  standing  in  his 
name,  but  has  purchased  shares  from  persons  who  have,  and  holds  power  to 
transfer  the  same,  and  has  requested  the  same  to  be  transferred,  but  the 


INDEX.  637 

STOCKHOLDER—  Continued. 

defendants  have  wrongfully  refused  to  transfer  the  same,  is  not  a  stockholder, 
and  can  not  be  joined,  as  plaintiff,  with  persons  who  are  stockholders;  and, 
if  the  suit  is  a  joint  one,  his  want  of  interest  is  a  good  ground  of  demurrer 
to  the  whole  bill.  Heath  v.  Erie  Railway  Co.,  8  Blatch.  347,  .  .  431 

Acquiescence  for  years  not  binding  where  acts  beyond  power  of  the  com- 
pany,          «J2 

See  CORPORATION,  16. 

Can  not  answer  for  the  corporation, w.268 

Where  they  are  proper  parties. — Ib. 

When  they  can  sue  directors. — 76.    See  CORPORATION,  15. 

Permitted  to  be  parties  on  dissolution  of  corporation.    See  CORPORATION,  4. 

Property  of  corporation  a  trust  fund  for  benefit  of.    See  CORPORATION,  1. 

See  PRACTICE  ;  ULTRA  VIRES  ;  ESTOPPEL,  8. 
TENANT  IN  COMMON : 

See  AGENCY  AFFECTING  EEAL  ESTATE,  10, 11, 12. 

TENANT  FOE  LIFE : 

See  ESTATE  FOR  LIFE  ;  TRUSTEE  UNDER  WILL,  1,2;  EXECUTORS'  IMPROVING 
TRUST  ESTATE,  1. 

TRUSTEE: 

Rule  governing.    See  DIRECTOR. 

Who  are, \  .'   ... n.48 

When  not, 373 

Can  not  act  for  his  own  benefit  in  contracts  relating  to  the  trust,        .      «.175 
Nor  use  information  gained  as  trustee  for  his  own  benefit. — 76. 
Is  entitled  to  cost  only  of  purchases  against  the  trust. — Ib. 
And  can  not  do  any  act  to  prejudice  the  trust. — 76. 

Apply  to  all  coming  within  the  relation, n.176 

When  liable  for  loss  of  trust  fund, w.252 

1.  STALE  DEMANDS. — Though  the  rule  as  to  limitation  by  time  does  not  apply 
in  the  case  of  express  trusts,  yet,  as  to  them,  in  equity  the  general  rule  is, 
that  stale  demands  are  not  to  be  encouraged.     M'Donnell  v.  White,  11  House 
of  Lords  Cases,  570 166 

2.  ACCOUNTS.— In  taking  accounts  against  a  trustee,  when  he  is  to  be  fixed 
with  a  personal  liability,  his  good  faith  is  to  be  considered,  and  every  fair 
allowance  is  to  be  made  in  his  favor,  especially  if  the  demand  against  him 
is  one  which  arose  many  years  ago,  and  the  beneficiary  was  at  the  time 
cognizant  of  all  the  matters  connected  with  it.— 76. 

3.  LIABILITY  OF  TRUSTEE.— A,  in  debt,  executed  a  deed  of  trust  for  the  benefit 
of  creditors,  and  among  the  property  assigned  was  a  lease  for  lives  renewa- 
ble forever,  on  a  high  rack-rent;  the  tenant  complained,  and  the  trustee, 
with  the  knowledge  of  A,  though  without  his  consent,1  but  with  the  full 
assent  of  A's  brother,  to  whom  A  had  committed  the  management  of  his 
affairs,  received  from  the  tenant  an  abated  rent;  A  complained  of  the 
abatement,  but  he  took  no  steps  to  put  an  end  to  it.     Held,  that  the  estate 
of  the  trustee  could  not,  after  the  expiration  of  the  trust,  be  called  upon  to 
make  up  the  deficiency. — 76. 

4.  LAPSE  OF  TIME.— While  the  trust  was  in  existence,  A,  who  had  been  at 
from  the  country,  returned,  was  informed  of  all  that  had  occurred,  and 
made  an  affidavit  in  a  suit  instituted  by  one  of  his  creditors.    In  this  suit 


638  INDEX. 

TBUSTEE —  Continued. 

a  receiver  was  appointed  over  one  of  the  estates.  Held,  that  from  the  date 
of  this  appointment  the  power  of  the  trustee  was  at  an  end,  and  that,  as  by 
the  law  of  Ireland,  the  receiver's  duty  related  as  well  to  the  arrears  then 
due  from  the  tenants  of  that  estate  as  to  those  which  afterward  would  be- 
come due,  and  no  steps  having  been  taken  to  enforce  payment  from  the 
trustee  of  arrears,  his  estate  could  not,  after  the  lapse  of  many  years,  be 
made  liable  for  those  arrears. — Ib. 

5.  BREACHES  OF  TRUST  CONSIDERED. — Diverting  the  means  of  a  railroad  from 
paying  interest  on  preferred-mortgage  claims  in  suit,  and  for  default  in 
which  a  sale  is  ordered,  to  making  improvements  on  the  road  which  might 
have  been  dispensed  with,  or  deferred,  evidences  an  intention  to  bring  the 
road  to  sale.     Cov.  &  Lex.  R.  R.  Co.  v.  Bowler,  et  aJs.,     .     .•"•'  •'**•"' ;*    467 

6.  It  is  not  a  good  defense  on  the  part  of  the  principal  in  such  and  similar 
transactions,  that  his  co-directors  participated  therein  and  approved  the 
same,  because  it  is  not  denied  that  he  exercised  over  such  co-directors  a 
controlling  influence.     From  the  time  he  concluded  to  prepare  for  the  pur- 
chase of  the  road,  his  personal  interests  became  antagonistic  to  that  of  the 
corporation,  and  he  ought  to  have  ceased  to  act  as  a  director. — Ib. 

Permitted  to  purchase  trust  property  by  approval  of  court,     .     53,  «.53,  «.179 

When  permitted  to  deal  with  trust  fund, w.110 

Doubted, ».lll 

His  discretion  to  sell  and  reinvest, ».331 

See  EXECUTOR — WHEN  LIABLE,  2. 

When  personally  liable  on  his  covenants.     See  CHURCH  PROPERTY,  4"  5. 
When  appointment  by  court  illegal.     See  CORPORATION,  6. 
What  is  notice  of  a  trust?   See  AGENCY  AFFECTING  REAL  ESTATE,  5 ;  NOTICE. 
See  ADMINISTRATORS'  PURCHASE  OF  TRUST  ESTATE;  EXECUTORS'  PURCHASE 
OF  TRUST  PROPERTY  ;  AGENCY  AFFECTING  REAL  ESTATE  ;  DIRECTOR. 

-EXMALEFICIO: 

1.  TRUST. — Z  bought  a  lot,  took  possession,  and  made  improvements.     Being 
unable  to  make  the  payments,  he  sold  a  part  to  S  by  parol,  the  division  line 
being  fixed  by  them.     M,  with  the  consent  of  Z,  made  the  deed  for  the 
whole  to  S,  he  agreeing  to  hold  the  other  part  in  trust  for  Z,  and  convey  to 
him  on  his  paying  his  "share  of  the  purchase-money.     S  refused  to  convey. 
Held,  that  he  held  in  trust  for  Z,  and  could  be  compelled  to  convey  ;  and, 
that  while  the  act  of  1856  destroys  all  parol  trusts  by  contract,  this  trust 
arose  by  implication  and  construction  of  law,  and  is  within  the  proviso  of  the 
fourth  section.     Seichrist's  Appeal,  66  Penn.  St.  ( 16  P.  F.  Smith),  237,      .  365 

2.  A  trust  arising  from  the  fraud  of  the  holder  of  the  title  is  one  by  operation 
of  law;  and  where  one  procures  a  title  which  he  could  not  have  obtained 
except  by  a  confidence  reposed  in  him,  and  abuses  the  confidence,  he  be- 
comes a  trustee  ex  maleficio. — Ib. 

Case  of  a  fraudulent  grantee, «.368 

FOR  MARRIED  WOMAN: 


When  can  bind  trust  fund, w.296 

Can  sue  in  his  own  name. — Ib.    See  HUSBAND  AND  WIFE,  3,  7,  8,  9. 

TRUSTEE  UNDER  WILL: 

1.  CHANGE  OF  TRUST  PROPERTY. — An  estate  devised  to  a  widow  for  life,  with 
remainder  to  children,  was  disposed  of  by  consent  of  all  parties  interested, 


INDEX.  639 

TRUSTEE  UNDER  WILL, — Continued. 

and  the  proceeds  deposited  with  one  of  the  children,  to  be  held  Hiibject  to 
the  use  of  the  life-tenant,  in  lieu  of  the  estate  so  disposed  of.  After  the 
death  of  the  life-tenant,  the  devisees  in  remainder  instituted  suit,  in  which 
a  distribution  of  the  fund  was  sought.  The  defendant,  who  held  the  fund, 
pleaded  the  statute  of  limitations.  Held,  that  the  fund  was  held  in  lieu  of 
the  estate  disposed  of,  and  Subject  to  the  life-estate  and  ultimate  rights  of 
the  remainder-men :  and  that  the  statute  of  limitations  did  not  commence  to  run 
until,  the  termination  of  the  life-estate.  Roberts  v.  Roberts,  7  Bush.  100,  .  246 
2-  STATUTE  OF  LIMITATIONS. — When  a  person  holding  a  life-estate  converts 
the  entire  estate  to  his  own  use,  he  becomes  immediately  responsible  to  the 
remainder-men,  who  have  a  right  to  recover  against  him  the  full  value  of 
their  estate ;  and  the  cause  of  action,  accrues  as  soon  as  the  wrong  has  been 
committed,  and  from  that  time  limitation  runs. — Ib. 

3.  RESULTING  TRUST. — Under  this  state  of  facts,  the  transaction  will  consti- 
tute an  express  trust  between  the  holder  of  the  fund  and  those  who  will 
finally  be  entitled  to  it ;  and  as  in  such  a  case  there  is  no  adverse  possession 
of  the  fund,  the  trust  will  not  be  barred  by  any  length  of  time. — Ib. 

4.  RUNNING  OF  STATUTE. — In  case  of  an  express  continuing  trust,  the  statute 
does  not  begin  to  run,  as  against  the  cestui  que  trust  and  in  favor  of  the  trus- 
tee, until  there  has  been  some  open  express  denial  of  the  right. — Ib. 

5.  TRUSTEE. — A  testator  gave  all  his  estate  to  trustees  to  invest  at  their  dis- 
cretion; out  of  the  income  to  pay  annuities  to  his  sons  during  their  lives; 
the  balance  of  the  income  for  the  use  of  his  wife  and  daughter  for  their 
lives,  as  the  wife  might  wish ;  any  of  the  income  not  so  used,  to  be  invested 
by  the  trustees,  permitting  the  wife  to  use  part  of  the  income  for  the  sons ; 
"  the  fund,  after  having  been  administered,  to  be  held  by  the  trustees,  after 
the  death  of  the  wife,  for  the  benefit  of  the  daughter,  the  income  to  be  ap- 
plied to  her  use  during  her  life."   After  the  death  of  the  wife  and  daughter, 
to  be  held  in  trust  for  the  benefit  of  the  children  of  sons  and  daughter 
until  .«aid  children  shall  be  twenty-one  years  of  age,  and  then  be  equally 
divided  among  said  children.     Held,  1.  That  the  trust  remained  during  the 
lives  of  his  sons  as  well  as  of  his  wife  and  daughter;  2.  That  the  children 
of  the  sons  and  daughter  took  by  purchase  and  not  by  limitation ;  3.  That 
the  children's  title  to  the  fund  vested  at  their  birth;  4.  That  birth  was  not 
a  contingency  too  remote  to  be  unlawful.     Barclay  v.  Lewis,  67  Penn.  (17  P 
F.  Smith),  316, '        '     362 

6  The  daughter  died  unmarried  and  without  issue,  and  the  mother  al         ed, 
the  sons  surviving,  neither  of  whom  had  then  any  child ;  one  was  afterward 
born      Held,  that  the  fund  did  not  vest  in  the  sons.     The  rule  that  a  re- 
mainder requires  a  particular  estate,  does  not  apply  to  trusts.    Per  HARE, 
p  j jk 

7  In  order  to  bind  a  trust  by  a  decree,  notwithstanding  there  be  many  liroita- 
'  tions  it  is  sufficient  to  bring  the  trustee  before  the  court,  and  h.rn  in  whom 

the  first  remainder  is  vested;  and  all  that  may  come  after,  although  nc 

8  No 'v^TED6  INTEREST.- A  testator  devised  to  trustees  to  collect,  etc.,  rents 
'  and  income,  and  «  pay  said  income,  etc.,  or  so  much  as  the  trustees  may  thin! 

proper  etc.,  under  all  the  circumstances  of  the  case,  for  the  suppor 
maTntenance  of  my  son  Charles  during  his  life."    Held,  that  the  mcome  was 


640  INDEX. 

TRUSTEE  UNDER  WILL — Continued. 

not  liable  to  attachment  under  a  judgment  against  the  son.  The  income 
was  payable  to  the  son  at  the  discretion  of  the  trustees.  Until  the  discre- 
tion was  exercised,  the  son  had  nothing.  Keyser  v.  MitcheU,  67  Penn.  St.  (17 

P.  F.  Smith),  473, 359 

9.  In  such  case,  chancery  will  not  interfere  to  control  the  trustees'  discretion. 
This  form  of  guarding  the  trust  and  the  income  from  the  prodigality  of  the 
son  is  as  effectual  as  an  express  exclusion  of  the  creditors  by  the  will. 
Girard  Life  Insurance  and  Trust  Company  v.  Chambers,  10  Wright,  485,  dis- 
tinguished.— Ib. 

10.  ILLEGAL  PLEDGE  OP  TRUST  PROPERTY. — In  this  case,  persons  who  made 
loans  of  money  to  a  trustee,  on  certificates  of  stock,  and  afterward  sold  the 
shares  of  stock  to  repay  the  loans,  were  held  liable  to  cextui  que  trust  for  the 
proceeds  of  the  shares.     The  transaction  indicated  that  the  trustee  was  not 
selling  the  shares  in  the  ordinary  course  of  business,  as  trustee,  but  that  he 
was  borrowing  money,  for  his  private  use,  on  a  pledge  of  what  was  in  his 
hands  as  trust  property ;  and  that  the  lenders  applied  the  proceeds  to  pay 
such  private  debts.     Jaudon  v.  National  City  Bank,  8  Blatch.  430,      .      379 

11.  TRUSTEE — EXECUTOR. — A  trustee  stands  on  a  different  footing  from  an  exec- 
utor, or  an  administrator,  or  even  a  guardian,  in  many  respects.     He  pre- 
sumptively holds  his  trust  property  for  administration,  and  not  for  sale. — Ib. 

12.  WILL — TRUST. — C  made  a  will  leaving  his  whole  property,  real  and  per- 
sonal, to  G,  whom  he  also  appointed  his  executor.     C  told  G  where  the  will 
was,  and  with  it  a  letter.     This  was  all  that  was  known  to  have  passed  be- 
tween the  parties.     The  letter  named  many  persons  to  whom  C  wished 
sums  of  money  to  be  given  and  annuities  to  be  paid;  but  "I  do  not  wish 
you  to  act  strictly  on  the  foregoing  instructions,  but  leave  it  entirely  to 
your  own  good  judgment  to  do  as  you  think  I  would,  if  living,  and  as  the 
parties  are  deserving,  etc."    G  paid  money  to  some  of  the  persons  men- 
tioned in  the  letter,  but  not  to  all.     Held,  that  in  this  case  there  was  not 
any  trust  created  binding  on  G.     M'Cormick  v.  Qrogan,  4  English  and  Irish 
Appeals,  82, 397 

13.  DUTY  IN  MAKING  INVESTMENTS  OP  TRUST  FUND. — The  law,  in  this  State, 
imposes  upon  trustees,  holding  trust  funds  for  investment  for  the  benefit  of 
minor  children  to  be  supported  from  the  income  accruing  therefrom,  the 
duty  of  placing  them  in  a  state  of  security,  of  seeing  that  they  are  pro- 
ductive of  interest,  and  of  so  keeping  them,  that  they  may  always  be  sub- 
ject to  future  recall,  for  the  benefit  of  the  cestui  que  trust.     The  investment 
of  such  funds  by  a  trustee  in  canal,  bank,  insurance,  railroad,  or  other 
stocks  of  private  corporations,  is  a  violation  of  his  duty  and  the  obligation 
of  his  trust.    King  v.  Talbott,  40  New  York  (Hand's),  76,        .        .        322 

14.  MUST  NOT  BE  EXPOSED  TO  HAZARD. — As  to  money  held  upon  trust  of  this 
kind,  it  is  not  according  to  the  nature  of  the  trust,  nor  within  any  just  idea 
of  prudence,  to  place  the  principal  of  the  fund  in  a  condition  in  which  it 
is  necessarily  exposed  to  the  hazard  of  loss  or  gain,  according  to  the  success 
or  failure  of  the  enterprise  in  which  it  is  embarked,  and  in  which,  by  the 
very  terms  of  the  investment,  the  principal  is  not  to  be  returned  at  all. — Ib. 

15.  IMPROPER  INVESTMENTS. — Accordingly  held,  that  where  the  interest  upon 
certain  legacies  were,  by  the  terms  of  the  will,  to  be  applied  by  the  exec- 
utors, so  far  required,  to  the  maintenance  and  education  of  the  legatees 


INDEX.  641 

during  their  minority,  and  the  principal,  with  any  accumulations  thereon, 
to  be  paid  to  them  severally  on  their  coming  of  age,  and  the  executors, 
upon  whom  the  trust  was  imposed,  invested  the  funds  in  stocks  other  than 
state  or  national,  the  legatees,  upon  coming  of  age,  were  not  bound  to  ac- 
cept such  investments,  but  had  the  right  to  call  upon  the  executors  to  pay 
the  amount  of  their  legacies  and  interest.  Held,  further,  that  the  proper 
rate  of  interest,  with  which  the  executors  are  to  be  charged  in  such  case,  i« 
six  per  cent,  with  annual  rests. — Ib. 

16.  The  proper  mode  of  making  up  the  interest  account  upon  this  basis,  where 
the  exectors  have  made  advances  for  the  maintenance  of  the  legatees  during 
their  minority,  stated. — WOODRUFF,  J. — Ib. 

17.  It  seems,  that  cestuis  que  trust,  in  the  case  of  improper  investments,  which 
are  divisible,  are  not  limited  to  rejection  of  ail  or  none  of  them,  but  may 
accept  such  as  they  choose  and  reject  the  others,      ....        323 

18.  Where  no  provision  is  made  by  a  testator  for  the  support  of  his  minor  chil- 
dren, other  than  by  the  income  to  be  derived  from  the  legacies  bequeathed 
to  them,  as  between  the  legatees  and  the  estate,  such  legacies  draw  interest 
from  the  death  of  the  testator. — Ib. 

19.  In  New  York  a  trustee  holding  funds  for  investment  for  minor  children, 
must  invest  in  Government  or  real  estate  securities.     Any  other  investment 
would  be  a  breach  of  duty,  and  the  trustee  personally  liable. — Ib. 

ULTKA  VIKES: 

See  CORPORATION,  16. 

WILL: 

1.  ELECTION  BETWEEN  DEVISEES. — Before  a  devisee  can  be  required  to  make  an 
election,  the  will  must  clearly  show  that  the  testator  so  intended.  Every 
case  of  election  supposes  a  plurality  of  gifts  or  rights  to  the  party  who  has 
thj  right  to  control  one  or  both,  that  one  should  be  substituted  for  the 
other.  Paris  v.  Dunn,  7  Bush,  276, 297 

See  EXECUTORS'  PURCHASE  OF  TRUST  PROPERTY  ;  TRUSTEE  UNDER  WILT.. 

YORK  BUILDING  COMPANY'S  CASE: 

History  of, *'85 

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A  Practical  Treatise  on  the  Law  of  Horses,  embracing  the  Law 
of  Bargain,  Sale,  and  Warranty  of  Horses  and  other  Live  Stock ; 
the  Rule  as  to  Unsoundness  and  Vice,  and  the  Responsibility  of  the 
Proprietors  of  Livery,  Auction,  and  Sale  Stables,  Innkeepers,  Veter- 
inary Surgeons,  and  Farriers.  By  M.  D.  HANOVER. 
I  Vol.  Svo.  $3  75, 


V 


LAW   PUBLICATIONS.  H 

Barton's  Suit  in  Equity.     \r 

History  of  a  Suit  in  Equity,  from  its  commencement  to  its 
final  termination.  By  CHARLES  BARTON,  of  Middle  Temple.  Re- 
vised and  enlarged,  with  Forms  of  Bills,  Answers,  Pleas,  Demur- 
rers, and  Decrees.  By  JAMES  P.  HOLCOMDE.  With  an  Appendix 
containing  the  Rules  of  Practice  for  the  Courts  of  Equity  of  the 
United  States,  revised  to  1870,  and  the  Ordinances  of  Lord  Bacon. 
1  Vol.  8vo.  -  .  -  $2  50. 

Holeombe's  Equity  Jurisprudence. 

An  Introduction  to  Equity  Jurisprudence,  on  the  basis  of  Story's 
Commentaries,  with  Notes  and  References  to  English  and  Ameri- 
can Cases.  Adapted  to  the  use  of  Students.  By  JAMES  P.  HOL- 
COMBE. 

1  Vol.     Svo,  $3  OO. 

Zinn's  Leading  and  Select  Cases  on  Trusts. 

Leading  and  Select  Cases  on  the  Law  of  Trusts  ;  with  extended 
Abstracts  of  other  Important  English  and  American  Cases,  illus- 
trating the  various  principles  pertaining  to  this  important  branch  of 
the  law.  With  numerous  Notes  and  References,  and  a  full  report 
of  the  great  case  of  the  Coving-ton  and  Lexington  Railroad  Com- 
pany v.  R.  13.  Bowler's  Heirs  and  others,  just  decided  by  the  Court 
of  Appeals  of  Kentucky,  embracing  a  Synopsis  of  the  Testimony 
and  Arguments  of  Counsel,  and  Opinion  of  the  Court  in  lull.  By 
PETER  ZINN. 

1  Vol.    Svo.        -       -        -        $G  JO. 

King  on  The  Constitution. 

A  Commentary  on  the  Law  and  True  Construction  of  the  Fed- 
eral Constitution.  By  JOHN  KING. 

1   Vol.    Svo.       -       -       -       $2  50. 

Montesquieu's  Spirit  of  Laws.  \r 

The  Spirit  of  Laws.  By  M.  DE  SECONDAT,  Baron  DE  MON- 
TESQUIEU. Translated  from  the  French  by  THOMAS  NUGENT.  A 
new  edition,  carefully  revised  and  compared  with  the  best  Paris 
edition.  To  which  are  prefixed  a  Memoir  of  the  Life  and  Writings 
of  the  Author,  and  an  Analysis  of  the  Work,  by  M.  D'ALEMBERT. 
A?  Vols.  Svo.  (In  Press.) 


12  ROBERT    CLARKE   &  CO.'S 

Ohio  Valley  Historical  Series. 

No.   i.  Bouquet's  Expedition  against  the  Ohio  Indians 
in  1764, 

With  a  preface  by  Francis  Parkman,  author  of  "  Conspiracy  of  Pontiac,"  etc.  Mapi  and 
plates  reproduced  by  the  Phofo-Lithographic  process. 

Svo.  cloth,  uncut  or  gilt  top,  $3.00.     Large  paper,  Imp.  8vo.,  .         .         $6.00 

No.  2.  Walker's  History  of  Athens  County,  Ohio, 

The  Ohio  Land  Company,  and  the  First  Settlement  of  the  State,  at  Marietta.  Five  Por- 
traits >iid  an  Historical  Map. 

Svo.  cloth,  uncut  or  gilt  top,  $6.00.    Large  paper,  2  volt.,  Imp.  Svo.,      .       $12.00 

No.  3.    Colonel    George   Rogers  Clark's  Sketch  of  his 
Campaign  in  the  Illinois  in  1778-79, 

With  Introduction  bv  Hon.  Henry  Pirtle,  of  Louiiville,  and  Major  Bowman's  Journal  of 
the  taking  of  I'.  >t  St.  Vincent. 

Svo.  cloth,  uncut  or  gilt  top,  $2.00.    Large  paper,  Imp.  STO.  •         •         $4.00 

+e      No.  4.   McBride's  Pioneer  Biographies. 

Sketches  of  the  lives  of  some  of  the  Early  Settlers  of  Butler  County,  Ohio,  with  por- 
trait of  the  author. 

z  vols.  Svo.  cloth,  uncut  or  gilt  top,  $6.50.     Large  paper,  Imp.  Svo.      .         $13.00. 

No.   5.   Colonel  James  Smith's  Account  of  his  Captivity 
with  the  Indians  in  Ohio,  in  1755-59, 

And  subsequent  adventures,  with  a  sketch  of  his  life;  and  Illustrated  Notes  ty  W.  M. 
Darlington,  Esq.,  of  Pittsburgh. 

Svo.  cloth,  uncut  or  gilt  top,  $2.50.     Large  paper,  Imp. Svo.    •         .         >         $5-°° 

No.   6.   Dr.  Daniel   Drake's  Pioneer  Life  in  Kentucky, 

--  ^       In  a  Series  of  Reminiscenital   Letters  addressed   to  his  children.      Edited  with  Notes  and  a 
Biographical  Sketch  by  his  son,  Hon.  Charles  D.  Drake,  of  St.  Louis. 

Svo.,  clcth,  uncut  or  gilt  top,  $3.00.     Large  paper,  Imp.  Svo.  .          $6.00 

No.  7.   Miscellanies. 

I.  Tour  in  the  States  of  Ohio,  and  Kentucky,  and  Indiana  Territory,  in  1805.  B> 
Jo&iah  Espy.  II.  Two  Western  Campaigns  in  the  War  of  1812-13.  By  Samuel  Williams. 
111.  The  Leatherwood  God  j  an  account  of  the  appearance  and  pretensions  of  Joseph  C. 
Dylks,  in  Eastern  Ohio,  in  1828.  By  R.  H.  Taneyhill. 

In  one  volume,  Svo  cloth,  uncut  or  gilt  top,  $2.50.     Large  paper,  Imp.  Svo.,  $5.00. 


MISCELLANEOUS   PUBLICATIONS.  13 

ROBERT  CLARKE  &  Co.  also  publish  the  following  works: 
Hall's  Legends  of  the  West. 

Sketches  Illustrative  of  the  Habits,  Occupations,  Privations,  Adventures  rnd  Sporn  of 
the  Pioneers  of  the  West.  By  James  Hall,  Author  of  "The  Wilderness  and  War  Path,"* 
"Tales  of  the  Border,"  etc.  iamo.  cloth,  gilt  top,  or  entirely  uncut,  •  .  $1.00 

Hall's  Romance  of  Western  History; 

Or,  Sketches  of  History,  Life  and  Manners  in  the  West.  By  James  Hall.  u.mo.  cloth, 
gilt  top,  or  entirely  uncut,  ..........  $2.00 

Howe's  Historical  Collections  of  Ohio. 

Containing  a  Collection  of  the  most  Interesting  Facts,  Traditions,  Biographical  Sketches, 
Anecdotes,  etc.,  relating  to  its  Local  and  General  History,  with  descriptions  of  its  Counties, 
Cities, "Towns  and  Villages.  Illustrated  'with  177  Engravings.  By  Henry  Howe.  Oi»« 
hundred  copies  printed  on  tinted  paper  and  bound  in  cloth,  gilt  top,  or  entirely  uncut,  uni- 
form with  the  Ohio  Valley  Historical  Strict.  8vo.,  620  pages,  •  •  •  $6.OO 

Pioneer  Record  and  Reminiscences 

Of  the  Early  Settlers  and  Settlement  of  Ross  County,  Ohio.  By  Isaac  J.  Finley  and 
Rufus  Putnam.  8 vo.,  148  pages,  cloth,  gilt  top,  •  •  •  •  •  $2.50 

Journal  of  Captain  William  Trent, 

From  Logstown  to  Pickawillany,  A.  D.  1752*  n°w  published,  for  the  first  time,  from 
a  copy  in  the  Archives  of  the  Western  Reserve  Historical  Society,  Cleveland,  Ohio.  To- 
gether  with  Letters  of  Governor  Robert  Dinwiddie;  an  Historical  Notice  of  the  Miami 
Confederacy  of  Indians;  a  Sketch  of  the  English  Post  at  Pickawillany,  with  a  short 
Biography  of  Captain  Trent,  and  other  papers  never  before  printed.  Edited  by  Alfred  T. 
Goodman,  Sc.retary  of  the  Western  Reserve  Historical  Society.  8»o.,  1 14  pajci,  cloth, 
gilt  top,  . $J-S° 

Young's  History  of  Wayne  County,   Indiana, 

From  Its  First  Settlement  to  the  Present  Time.  With  numerous  Biographical  and  Family 
Sketches.  Embellished  with  upward  of  Fifty  Portraits  of  Citizens  and  Views  of  Buildings 
By  Andrew  Young.  8vo.  cloth,  uncut, *S-°° 

Ranck's  History  of  Lexington,   Kentucky. 

Its  Early  Annals  and  Recent  Progress,  including  Biographical  Sketches  and  Personal  Rem- 
iniscences of  the  Pioneer  Settlers,  Notices  of  Prominent  Citirens,  etc.  By  George  W. 

$4  co 
Ranck      8vo.,  cloth,  uncut,         .... 

Law's  Colonial   History  of  Vincennes,   Indiana, 

Under  the  French,  British,  and  American  Government,,  from  its  First  Settlement  down 
to  the  Territorial  Administration  of  General  Wm.  Henry  Harrison.  By  H  n.  John^aw. 
lamo.,  157  pages,  cloth, 


14  ROBERT    CLARKE   &   CO.'s 


Crawford's  Campaign  against  Sandusky,  1782. 

An  Historical  Account  of  the  Expedition  against  Sandusky,  under  Col.  William 
Crawford,  in  1781.  With  Biographical  Sketches,  Personal  Reminiscences,  and  Descriptions 
of  Interesting  Localities;  including  also  Details  of  the  Disastrous  Retreat,  the  Barbarities 
of  the  Savages,  and  the  Awful  Death  of  Crawford  by  Torture,  with  a  fine  Steel  Portrait 
of  General  William  Irvine,  Commander  at  Fort  Pitt,  1781-83,  who  authorized,  helped  to 
organize,  and  issued  instructions  for  the  campaign.  By  C.  W.  Butierfield.  8vo.  Cloth, 
g'lt  top,  » $3.50 

Studer's  History  of  Columbus,  Ohio. 

Columbus,  Ohio :  Its  History,  Resources,  and  Progress,  from  its  Settlement  to  the 
Present  Time.  With  Map  and  numerous  Illustrations.  By  Jacob  H.  Studer.  12 mo. 
Cloth, $2.00 

Hatch's  War  of  1812  in  the  Northwest. 

A  Chapter  of  the  History  of  the  War  of  1812  in  the  Northwest:  Embracing  the 
Surrender  of  the  Northwestern  Army  and  Fort,  at  Detroit,  August  1 6,  181,3  ;  w't')  a  De- 
scription and  Biographical  Sketch  of  the  celebrated  Indian  Chief,  Tccumseh.  By  Colonel 
William  Stanley  Hatch,  Acting  Assistant  Quartermaster-General  of  that  Army.  i8mo. 
pp.  156.  Sheep, '  $,.25 

Poole's  Anti-Slavery  before  1800. 

Anti-Slavery  Opinions  before  the  year  1 800.  An  Essay.  Read  before  the  Cincin. 
nati  Literary  Club,  November  16,  1872.  By  William  F.  Poole.  To  which  is  appended 
a  fac-iimilc  Reprint  of  George  Buchanan's  Oration  on  the  Moral  and  Political  Evil  of 
Slavery,  delivered  at  a  Public  Meeting  of  the  Maryland  Society  for  Promoting  the  Aboli- 
tion of  Slavery,  Baltimore,  July  4,  1791.  8vo.  Paper,  7 5c.  Cloth,  .  .  $1.25 

Tyler  Davidson  Fountain  of  Cincinnati. 

Donated  to  the  City  by  Mr.  Henry  Probasco.  Giving  a  History  and  Description  of  the 
Fountain,  Dedicatory  Exercises,  etc.  Large  Plate  and  Portraits.  i8mo.  Paper,  .  400- 

Spring  Grove  Cemetery. 

Its  History  and  Improvements,  with  Observation!  on  Ancient  and  Modern  Places  of 
Sepulture. 

Quarto,  pp.  viii,  199.  The  text  beautifully  printed  within  ornamental  colored  borders, 
on  heavy  tinted  paper,  and  illustrated  with  twenty-six  full  page  and  three  small  photographs, 
giving  general  views  of  and  in  the  Cemetery,  its  Lakes,  Lawns,  Trees,  etc.,  and  of  some 
of  the  best  monuments.  Bound  in  cloth,  gilt,  gilt  edges,  ....  $15.00 

An  8vo.  edition,  without  the  Borders  and  Illustrations,  cloth,          .          .  $2.00 


MISCELLANEOUS   PUBLICATIONS.  15 

Reprints  of  Rare  American  Tracts. 

I.  The  Cow  Chacc. 

An  Hrroick  Poem  in  Three  Cantos.  Written  at  New  York,  1780.  By  the  late  Maj. 
Andre,  with  explanatory  notes  by  the  Editor. 

"The  man  who  fights,  and  runs  away, 

May  live  to  fight  another  <Uy," 

Said  Butler  in  his  deathless  lay. 
"  But  he  who  is  in  battle  slain 

Can  never  rise  to  fight  again," 

As  wisely  thought  good  General  Wayne. 

London:  Printed  for  John  Fielding,  No.  13  Pater-Noster-Row,  1781. 
Reprinted  from  this  rare  quarto  edition,  with  the  original  preface,  notes,  etc.     8vo., 
32  pages,  sewed,  uncut,  75  cents,     Large  paper,  Imp.  8vo.,  sewed,  uncut,          .       $1.50. 

II.  An  Appeal  to  the  PubHc  on  Behalf  of  Cameria. 

(AMERICA.) 

A  Young  Lady  who  was  almost  Ruined  by  the  Barbarous  Treatment  of  her  own 
Mother.  London  :  printed  in  the  year  1781.  8vo.,  sewed,  uncut,  75  cents.  Large  paper, 
tewed,  uncut,  .  ......  $1.50. 

III.  Some  Account  of  an   Existing  Correspondence  now 

carrying  on  between  the  Inhabitants  of  the   Moon 
(America)  and  the  Natives  of  this  Country; 

To  which  is  subjoined  a  List  of  such  Articles  as  are  immediately  wanted  for  the  Export 
Trade.  By  some  Merchants  just  arrived  from  that  F'lanet.  Interspersed  with  several 
useful  and  valuable  Hints,  particularly  adapted  to  the  use  of  those  gentlemen  who  are  fond  of 
Speculation.  A  Work  strongly  recommended  to  the  Perusal  of  the  Merchants,  Bankers, 
Manufacturers,  Wholesale  Tradesmen,  Shopkeepers,  Underwriters,  Insurance  Brokers,  and 
Ladies  of  Great  Britain.  London  :  Printed  and  sold  by  H.  Fry,  Finsbury-Place,  Finsbury- 
iquare,  1800.  8vo.,  sewed,  uncut,  75  cents.  Large  paper,  sewed,  uncut  $'-S° 


16  ROBERT   CLARKE   &   CO. 


Warder's  Du  Breuil's  Vineyard  Culture, 

Vineyard  Culture  Improved  and  Cheapened  5    by  A.  Du  Breuil,  Professor  of  Viticulture 
and  Arboriculture  in  the  Royal  School  of  Arts  and  Trades,  in  Paris.     Translated  by  E.  and 

C.  Parker,   of  Longworth's  Wine  House.       With  Notes  and   Adaptations  to  American 
Culture,  by  John  A.  Warder,  Author  of  "American  Pomology."     With  144  Illustrations. 
One  volume  nmo.,  neatly  printed  and  bound,  cloth,         ......      $2.00 

Reemelin's  Wine-Makers'  Manual. 

The  Wine-Maker's  Manual :  a  Plain,  Practical  Guide  to  all  the  Operations  for 
the  Manufacture  of  Still  and  Sparkling  Wines;  embracing  Chapters  on  the  Vintage, 
When  and  How  to  Pick  and  Cull  Grapes;  Preparations  for  Wine-making;  the  Ingredi- 
ents and  Improvements  of  "  Must;"  Fermentation  and  the  Changes  produced  by  it;  the 
Heating  or  Firing,  Keeping  and  Bottling  of  Wines  ;  Still,  Sparkling,  Sweet,  Spiced,  and 
Frozen  Wines;  Wine  Colors;  the  Constituents,  Acidity,  and  Ailments  of  Wine;  Artifi- 
cial and  Imitation  Wines.  The  work  also  contains  full  instructions  for  making  Cider, 
Fruit  and  Berry  Wines,  etc.,  etc.  By  Charles  Reemelin,  Author  of  the  "  Vine- Dresser's 
Manual."  One  volume  I  zmo.,  extra  cloth,  .  .  •  .  •„**.'•  $I>25 

Klippart's  Land  Drainage. 

The  Principles  and  Practice  of  Land  Drainage  ;  embracing  a  Brief  History  of  Under- 
draining  j  a  detailed  examination  of  its  Operation  and  Advantages  ;  a  Description  of  Various 
Kinds  of  Drains,  with  Practical  Directions  for  their  Construction;  the  Manufacture  of 
Drain  Tile.  Illustrated  with  nearly  100  Engravings.  By  John  H.  Klippart,  Author  of 
the  "  Wheat  Plant,"  Corresponding  Secretary  of  th«  Ohio  State  Board  of  Agriculture,  etc. 
Second  Edition.  One  volume-,  nmo.  .  .  .  .  .  .  .  $'-75 

Brunner's  French  Reader. 

Elementary  and  Pronouncing  French  Reader;  containing  pronouncing  rules  and  exer- 
cises on  French  pronunciation ;  a  selection  of  interesting  anecdotes ;  a  concise  treatise  on 
French  Verbs;  and  a  Vocabulary  of  all  the  words  contained  in  the  work,  with  concise 
Rules  for  acquiring  the  Gender  of  French  Nouns.  By  Alphonso  A.  Brunner.  Fourth 
Edition.  i8mo.,  half-bound, •  .  60  cents. 

Rives'  Chart  of  Cranial  Nerves. 

A  Chart  of  the  Physiological  Arrangement  of  Cranial  Nerves.    By  Edward  Rives,  M. 

D.  Printed  in  Large  Type,  on  a  sheet  28x15  inches,  mounted  on  card  board  or  folded  in 
cloth  case, 60  cents. 

Hurt's  The  Far  East. 

The  Far  East ;  or,  Letters  from  Egypt,  Palestine,  and  other  Lands  of  the  Orient. 
Illustrated  with  Engravings,  Maps,  etc.  By  N.  C.  Burt,  D.  D.,  author  of  "  Houis  among 
the  Gospels,"  "  The  Land  and  its  Story,"  etc.  tamo,  cloth,  .  .  .  §1.75 


